Short sales have a life of their own and are not for people that do not have a lot of patience and perseverance. It will normally take anywhere from 60 to 90 days to complete a short sale, after you have received a purchase contract.
If you are representing the seller, it is imperative that you explain what is going to happen in this process. First, you have to explain that the lender will not even consider a short sale until they have missed a payment. This is really hard for some sellers to understand because they have been struggling to make their payments on time. Some of them have likely accumulated a lot of credit card debt just so they could continue to make their mortgage payments. You also have to explain to them that their credit scores are going to suffer. You have to explain that some lenders will be forgiving and take the shortfall in the difference between what the property is sold for and what is owed as complete payment of the debt and some will not and file a deficiency judgment against them. You have to explain to them that they will be getting phone calls from the lenders asking about when they are going to make payments and some threatening to take action against them. You should explain that by doing a short sale, they will not be getting any proceeds from the sale, but they will not have a foreclosure on their record, which will make it easier in the future to purchase a home again.
When listing the property, it is highly important to list it at a price that will encourage buyers to want to look at it. Listing it too high will deter buyers, especially knowing that it is a short sale and can take some time to complete. You have to prepare the seller that if there is no activity in the first 10 days or so, you will need to drop the price. Continue to drop the price every 7-10 days until you get activity. After you have listed the property for sale, make sure you have your seller notify the lender that they have listed the property for sale and it is likely to be a short sale. The lender will require the seller to fill out a financial statement, write a hardship letter explaining why they can no longer make their payments, send in copies of recent pay checks, bank statements and 2 years tax returns. You will also need to have them fill out an authorization for communication so that you may talk with their lenders on their behalf. This is crucial to facilitating the sale of the property. You will want to get all of this information in to the lender as soon as possible so when their is a purchase contract received you are ready to go.
When you receive a contract from a prospective buyer, you will want to explain the process to their agent. You will want to let them know that along with the contract, they will be having their clients sign a short sale addendum notifying all parties that acceptance of the contract and all the terms are subject to the lender's final written approval. You should let them know that even though the sellers have ratified the contract, it is not considered accepted until they get that written approval. You should also let them know that none of the time frames in the contract will start until they receive that written approval. They need to also know that it will be an "As Is" sale because the sellers do not have any funds to make repairs and the lender will not pay for any repairs and that the contract should be written that way. They should also know that it will take at least 60 days to get an answer from the bank, in most cases. After the approval has come from the lender, they will want the close of escrow to not be more than 30 days. During this process, it is extremely important that the seller's agent stay in touch with the lender to find out where they are in the process and also to make sure that they have constant updated contact information of people that are handling the short sale on the lender's end. The transaction goes through many hands on that side and can get lost in the shuffle. It is also very important to have complete information when the lender requests it or the file will be shredded and you will have to start all over at the beginning.
In conclusion, it is important to have someone that is knowledgeable about this process if you are going to get involved in a short sale situation.
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