Disclaimer: the information on this website is deemed accurate and reliable at time of posting however should never substitute the advice from an attorney or tax professional. Procedures vary from state to state and only a licensed professional can more accurately assess any liabilities or tax repercussions of buying or selling foreclosures/short sales. This site is for informational purposes only and does not provide legal, tax or real estate advice. Always contact an attorney, tax professional or retain a real estate professional for such advice.
What to expect when obtaining short sale Approval:
•Many Realtors and Buyers will ask if the home has been “approved” for a short sale. I think it is very important to know the differences in the term “Short Sale approved”. In some cases a bank may speak to a homeowner in the very early stages (ie. Homeowner has lost their job) and tell them they are approved for a short sale. This is NOT good terminology to use! This is a simple pre-approval for the process, similar to the many credit card approvals we receive in the mail where we find we still have to jump through the hoops to get the card. This is no different! Just because the homeowner meets general criteria to be considered for a short sale does not necessarily mean that the short sale will be approved or if it is, it may not be approved for the amount of the sales contract! A short sale can only be approved once it has gone through the entire process as detailed below. The only time a property should be marketed as being “Short Sale Approved” is once a contract has been submitted and has successfully gone through the entire process and has obtained written authorization for a short sale netting an exact amount to the bank.
• Once a home is listed with a member of the Walker Derby Team, we get to work immediately! The listing paperwork is sent directly to the lien holder(s) along with other required information: 2 years of taxes, a hardship letter from the seller, several bank statements, 60 days of Paystubs and a monthly budget breakdown. After submission, we wait for an offer from a buyer.
• It is important to note that although initial paperwork is submitted, most banks will not move forward with the Short Sale Process until a contract has been presented for the property.
• Immediately once a home goes under contract, our short sale team picks back up and updates the bank with the changed status and forwards binding contract directly to them.
• Our Short Sale Coordinator assigned to your contract will call at least once a week for an update. Most of the time there is no update other than it is being reviewed. Regardless of the update, all parties (on buyer and seller side) will be notified of the contact and updates (if any)
• Once the contract has been faxed to the bank it can take about 10 business days for it to be uploaded for review
• Typically the file will then go through an initial review for about 30 – 45 days.
• After the initial review it will then be assigned to a Short Sale Negotiator with the bank. Depending on the bank there can be tiers of negotiators from this point on. No more than three, although two is more common.
• After the initial review the file transfers to the 1st negotiator who will deem the whether it is an appropriate short sale. This 1st negotiator usually has 30 days to review the file and can give little to no updates during this time.
• Although updates are sporadic, our Short Sale team will continue to call on a weekly basis to check the status of updates. The bank will ask for updated material from time to time such as pay stubs and bank statements from the seller; updated pre-approval letter from the buyer
• After the 30-45 day window, the file will then transfer from the 1st negotiator to the final negotiator for review.
• This final negotiator will get the file ready for the investor’s review. They will start the negation process: take away home warranties, lower closing costs, request higher contract price and even change the settlement offered for lower tiered liens (often known as second mortgages)
• The negotiator at this phase will then submit this to the investor for approval. Usually there is little change in the contract from this point. The last negotiator is a great firewall as to what does get in and out.
• Once we have final bank approval for the Short Sale, the bank will usually give the contract 30 days to close
• We will NOT say this is approved in anyway nor give out closing dates until we have written approval.
Some TIPS we suggest for Buyers and their Agents:
• All short sale contracts must include the Walker Derby Short Sale Exhibit
• We strongly urge the Buyer to not invest any money into the property until we have approval (inspection, appraisal, etc) nor lock in a rate as we cannot guarantee the timeframe and many locks will expire costing the buyer $.
• Be Patient! Understand that Short Sales can be a lengthy process and be prepared for timeframes where there are not any updates. We have received short sale approvals in as little as 17 days from contract submission yet also as long as 9+ months! Most short sales do turn around approvals in 60-150 days. We would strongly suggest that if you do not have a situation that will allow for closing flexibility or if you simply need to be in your new home within 30-45 days then perhaps skipping short sales altogether may be a better alternative for you.
• Understand that a Short Sales contract IS A CONTRACT! According to the National Association of Realtors, there is a big misconception about the short sale process. Writing a contract contingent upon final short sale approval is just another contingency that must be met during the contract timeframe, no different than a financing or appraisal contingency. It is important to understand that a short sale is a transaction where the home is still owned by the homeowner, not the bank. The owner will sign the contract and contract will become binding subject to the bank’s approval of the terms.
Copyright © 2010 Walker Derby Team No content may be used without the written permission of Jennifer Walker Derby
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