A Look At The Short Sale As A Work In Progress
While I usually assist sellers (and their agents) who need to sell their homes by way of short sale, there are times where I am asked to represent a buyer in the short sale transaction.
As a rule – I’m not interested in representing buyers who wish to waste their time trying to buy a short sale. It’s not that short sales can’t be done – they can. It’s just that most listing agents have no clue as to how to do a short sale – and will not allow me and my short sale specialists to negotiate with the seller’s lender. If I can’t be in the position to create and submit the short sale package, I don’t know if I’m wasting my time – or more importantly – that of my client.
For openers, I need to know that the seller qualifies to be considered for a short pay settlement. I hate to break this to you, but there are quite a few folks out there who can afford to keep their homes – yet simply don’t want to pay for a home that isn’t worth as much as they owe. No matter how good your offer might be, the lender can derail your plans if the seller is jerking them around. You just have to accept that in some cases, the lender is going to foreclose – and there’s nothing you can do about it.
Over the next few weeks, I am going to document the journey of this short sale purchase so that you can appreciate how these sales work. As with all real estate transactions, it may or may not end up closing – though we feel fairly comfortable with our chances for success. For obvious reasons, I will have to limit certain details since this transaction is a pending transaction.
We executed our contract for a townhouse on March 9th. Included in our signed papers was a Letter of Authorization (LOA) which authorizes me and my negotiator to speak with the seller’s lender. We faxed the LOA over to the seller’s lender on the following day.
On March 12th, the lender verified that the LOA had been received, but not yet entered into their system.
On March 15th, the lender acknowledged receipt of the LOA. They also supplied us with the list of documents they needed for the short sale package. The items requested include:
- Hardship Letter
- Financial Worksheet
- Executed Purchase and Sale Agreement
- Listing Agreement
- Seller’s Pay Stubs or Proof of Income for previous 30 days
- Seller’s Bank Statements for previous two months
- First Two Pages of Seller’s IRS form 1040
- Purchaser’s Proof of Funds
The lender also informed me that their current turnaround time on short sales is 30 to 45 days, which is perfect for us, as we want to close by the end of April – and we’ve got a good, solid, clean package.
I communicated the list to the listing agent, and told her that I needed a FInancial Worksheet (which I supplied the new HUD version), a copy of the listing agreement, the seller’s pay stubs, the seller’s bank statements, and the first two pages of the seller’s IRS form 1040.
When representing the seller, I explain what will be needed by the bank when I take the listing. It doesn’t come as a surprise to them – they know exactly what we need when we get a contract. But in this case, I am representing the BUYER… and things are a little different. The seller didn’t understand the urgency of our need for the requested documents – and the listing agent was unable to reach the seller for the better part of a week – so we didn’t get our requested documents until last Saturday, the 20th.
Meanwhile, we have sent a request to the city so that we could determine what indebtedness, if any, the seller has with the city regarding water, sewer, garbage collection, or any other special assessment. We also put a request into the homeowner’s association (HOA) to determine what fees must be paid to transfer title. We also pulled a lien search on the seller so that we could discover any potential legal conflicts.
The HOA quickly let us know the current transfer fees – but since then, they have not responded to our requests for the payoff. As of Monday the 22nd, we had run out of time – so we made the decision to estimate the amount the seller owes to the HOA. We finalized the HUD-1, then performed a Short Sale vs REO Disposition Analysis to exemplify how our offer stacks up to a foreclosure. We finished preparing the package and submitted it to the lender on Tuesday March 23rd.
We called the lender the next day to ensure they received the package, which they did. They noted a missing item, which we promptly provided. After such a delay to get the information from the seller – we missed one page. I take full responsibility.
Today, the 25th, the lender acknowledged receipt of the missing page – and informed us that our case has been assigned to a Loss Mitigator. We inquired as to whether the Brokers Price Opinion (BPO) that we requested in our package had been ordered – but it had not. Frankly, we didn’t expect them to have ordered the BPO yet – but you gotta ask… ’cause they’re not going to volunteer any information.
So far, the lender has been processing this short sale in a professional manner – which is very encouraging, as my client is eligible for the first time homebuyer tax credit, and time is of the essence. They have, thus far, adhered to the expectations they set at the outset. And we have delivered a superior package complete with the kind of analysis that allows a good loss mit person to evaluate this deal in 15 minutes.
At this point, we’re still looking to get accurate numbers from the HOA – though it’s not as pressing an issue, anymore. We’ll check in with the lender next Monday to assure that the BPO has been ordered, and we’ll pull the latest comps to do our own BPO.
As always, if you have any questions regarding real estate in the greater Atlanta area, feel free to contact me here.