Anatomy of a Short Sale, The Guts
By now most people know that a short sale takes place when a seller owes more than their house is worth and requests the lender(s) release title for a reduced amount.
To be a successful short sale buyer or seller it can take guts, and knowing the guts of the transaction can help. I began to think about all the moving parts involved to be successful in buying or selling a short sale and decided to break it all down.
· Seller: May not really want to sell, but must due to finances or relocation demands.
· Listing agent: May or may not fully grasp all the intricacies of marketing a short sale and advising sellers regarding process, outcome, time frames and long term consequences.
· Attorney: Recommended to advise sellers of the pros & cons in regard to debt, credit damage, potential deficiencies legal and tax consequences.
· Buyers: Often over optimistic regarding pricing, time frame, considers other listings while waiting. They can become frustrated with the lack of information.
· Buyers Agent: Like the selling agent may or may not grasp the process and timing well enough to properly inform buyers who get anxious and just want to buy a home.
· Short Sale Negotiator: Often this is the listing agent, but lately more third parties have found a niche to serve both buyers and sellers and cut through the red tape. This frees up the listing agent to do what they do best, list more homes not sit on the phone. This is a critical position that deserves to be explored. Not all negotiators have successful track records.
· Servicing Bank: This is the bank whose name goes on the check every month with the mortgage. They may or may not be the investor who ultimately decides whether to approve the short sale. The Servicing bank will handle the process with the negotiator and the investor.
· Investor: This is the person or group who actually own the note on the property. When the servicing bank processes the short sale, they seek the investor’s final approval in order to complete the transaction.
· BPO Agent: This is an agent hired by the Servicing lender to provide a Brokers Price Opinion on the property for sale. Ideally they know the market the house is in and can fairly represent its value. Too often, they are agents who are traveling a great distance into unfamiliar markets and provide less than accurate information.
· Appraiser: Used by some lenders on more expensive or unique properties to determine value like the BPO agent would.
· Buyers lender: Will eventually provide financing for the purchase if approved. Must wait to complete a file, order the appraisal and lock the rate until the Seller’s Lender(s) approve the price and terms.
· Buyers Inspector: Inspections can take place at any stage of the process. I suggest we wait until the lender approves so as not to spend my client’s money for an inspection on a house they may not get to buy. More listing agents are requiring this up front as a sign of greater commitment.
· Know it all “friend, brother-in-law, neighbor, uncle or father who will render an opinion on the purchase as fact while in possession of very few actual facts. These people generally mean well but may be trying to inflate their own ego by repeating something someone else told them which may or may not be true or apply to your situation. Handle these people with care.
While I’m sure I left someone or some situation out, these are the moving parts of a short sale. Is it any wonder why they take so long and so many never make it to approved status? I've successfully listed and aided buyers in short sales since 2002. If you have questions about your situation, let's talk about it.
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