The Process
help@mdshortsaleco.com

Short Sale REALTOR®

Serving all of Maryland

Search Our Site

This will probably be the first and last time you will be in a situation to have to Short Sell your home or investment property. Due to this lack of experience taking the first step towards dealing with your underwater mortgage is filled with difficult questions whose answers are hard to find. Taking that first step is made easier by knowing what to expect and having a Realtor who specializes in short sales guide you through the process. In this article you will learn about the  the Timeline, parties involved,  and the 5 stages of a successful transaction. Armed with this knowledge you will be able to make an informed decision about how to deal with your mortgage dilemma.

 
  
 

PARTICIPANTS OF A SHORT SALE TRANSACTION

 

To better understand the process it helps to know the parties involved and their responsibilities. There are more parties involved in these sales than a traditional real estate transaction. Each has their own roles and responsibilities that need the experience of a Short Sale Realtor to coordinate to ensure a smooth transaction.

 

Short Sale Participants Graphic 1
 
 

Seller

The primary goal is to help the homeowner avoid foreclosure by selling their underwater home. The homeowner will be asked to keep the property open for showings to potential buyers and to provide documentation throughout the process as it is needed.

Realtor

The Real Estate agents’ job is to coordinate with all of the parties involved in the process of selling the home. The listing agent will market the property according to guidelines provided by the Short Sale Lender while adhering to best practices that result in successful transactions. Additionally it is the responsibility of the Listing Agent to set proper expectations while communicating throughout the process to all involved parties.

Negotiator

The Short Sale negotiator’s job is to work with the seller, agents and buyer to successfully obtain approval from the lender. The approval will outline the terms of the sale and negotiated short payoff of the sellers mortgage. This process requires in depth knowledge of distressed loan guidelines, aggressive follow-up and a knack for solving problems that result in a win-win for everyone involved.

Buyer Agent

The buyer agent represents the interest of the buyer throughout the transaction and will communicate with the buyer providing updates and expectations throughout the process.

Buyer

The buyer is the party who agrees to purchase the property from the seller contingent on the lender approving the terms of their offer. The qualifications and willingness to wait are key attributes to an ideal buyer. They are often rewarded with a great value as compared to a traditional purchase. We look at the buyer as part of the “team” that is assisting the homeowner in avoiding foreclosure.

Title Company

The Title Company is a key part of the process. They are involved in the upfront research to uncover various liens and encumbrances that will need to be address throughout the negotiation process. The title company will provide estimated settlement sheets used in the  process and will handle the actual settlement at the end of the transaction.

Investor

The investor is the entity that owns the loan that is being Short Sold. Even though your mortgage statement may be from “Bank of America” the underlying owner of the loan is most likely another company. There are thousands of entities that own mortgage securities all with different guidelines and requirements needed to execute a successful short sale.

Mortgage Servicer

A mortgage servicer is the company that manages a portfolio of loans owned by the investor. Their job is to collect payments and in the case of a delinquent loan the mortgage servicer manages the process on behalf of the investor/ owner of the loan. There are often various departments and individuals at the Mortgage Servicer that act in various roles throughout the process.

Mortgage Insurer

Generally if you put less than 20% down when the home was purchased you were required to obtain mortgage insurance. A mortgage insurer protects the mortgage investor from a portion of losses should the borrower default. Most mortgage insurers have given “delegated authority” to mortgage servicers to approve short sales on their behalf. There are situations where in addition to the mortgage investor agreeing to a short payoff you need separate approval from the insurer in order to proceed to settlement.

Junior Lien Holder

A junior lien holder is an entity that has a lien against the property that is subordinate to the First Mortgage. This can include a Home Equity Loan, Second Mortgage, Condo or HOA lien, Water Lien, and other liens that can attach to your property. These junior liens must agree to release their lien against your property in order to sell the property and are a key part of the negotiation process.

 
 
 

THE SHORT SALE PROCESS

 

TIMELINE

 

Typically a short sale from beginning to end takes on average between 90 and 180 days. All situations are different and there are a few variables that come into play including but not limited to:

-Time needed to find a buyer for your property

-The type of loan you have and associated investor and servicer requirements

-The type of financing the buyer chooses.

 

To follow is an estimated timeline of a successful transaction based on the 5 main stages below.

 
 

Timeline 1

 

STAGE 1: CONSULTATION

 

TIMEFRAME: 24-48 Hours

 

GOALS:

-Answer Homeowner Questions and Concerns

-Educate on all Available Options

-Set Expectations

-Prequalify for Short Sale

 

The first step is the process starts with a phone or in-office consult. During this consultation we will discuss the circumstances behind you exploring a sale of your home and answer any questions you may have, possibly explore other options that may be available and set expectations as to how the process would play out given your specific circumstances. You may be asked to complete a Pre-Qualification Survey to be sure we have all of the information needed to give proper expectations and be prepared for any hurdles we may encounter throughout the process.

 
 
STAGE 2: PRE-LISTING
 

TIMEFRAME: 7-14 Days

 

GOALS:

-Collect Required Documentation

-Communicate with Lender

-Prepare Property for Listing

 

During the Pre-Listing phase we will prepare the property to be put on the market. As a piece of mind for our distressed homeowners please know that the home will be sold “as-is”. This means you will not be asked to make any repairs and while the buyer will have the option to do an inspection, anything found will be their responsibility to repair when they purchase the home. We will ask that you attempt to keep the home clean and orderly as possible while we take photos and show the property to prospective buyers.

 

During this pre-listing phase we will also work closely with the negotiator to begin discussions with your lender. This will involve collecting basic documentation that will be required throughout the process. The Negotiator will attempt to get you qualified for any programs your lender or government may offer.

 
 

STAGE 3: MARKETING

 

TIMEFRAME: 14-60 Days

 

GOALS:

-Find Qualified Buyer

-Establish Market Value

-Monitor Foreclosure Proceedings

-Set Expectations with Potential Buyers

 
 

The home will be listed in the local MLS and syndicated to dozens of online home search websites. Many people ask if we will list the home at a price below market rate and the answer is no. Later in the process your lender will perform their own appraisal which will be used when deciding whether or not to accept an offer that results in the loan being shorted. We will price the property at “market value” to give the best chance of success. During the marketing phase we are attempting to find the right buyer to work with us as we navigate the short sale process.

 

Once a buyer comes forward and expresses serious interest we will work with the buyer and their agent to structure a contract that gives the best chance of success to be approved by your lender. There are key terms and expectations that must be set at this point in the process. Across the industry only 40% of short sales close, most of the time it is because the agent treats the transaction as they would a traditional sale and that sets the seller up for failure and establishes the wrong expectations with the other parties of the  transaction. Our process and best practices are proven to help struggling homeowners avoid foreclosure and walk away from their underwater mortgage.

 
 

STAGE 4: NEGOTIATION

 

TIMEFRAME: 30-90 DAYS

 

GOALS:

-Obtain Short Sale Approval Letter

-Procure Full Waiver of Deficiency

-Negotiate Junior Liens

-Relocation Incentive

 

Once a buyer is found and the contract is signed the offer will be presented to the lender. During this time the buyer will complete their inspections and associated due diligence. Once the offer has been received by the lender they will establish the value they will require in order to approve the transaction by sending their own appraiser or “BPO” agent to the property. Additional documentation may be required to verify the hardship and prove why the seller can no longer afford the mortgage. The short sale negotiator will follow up multiple times per week for status updates to make sure there are no outstanding requests. This follow-up is also done to hold the mortgage company accountable to government and investor imposed guidelines. In the event there are other liens or mortgages on the property negotiations on these items will conducted as well.

 

The key document we are trying to obtain during this stage is the Approval Letter. The approval letter contains the terms of the sale between buyer and seller that the lender will accept and also outlines the terms by which the lender will allow the seller to get out from under their underwater mortgage. Our goal is that the letter includes language that the seller is being forgiven for the entire mortgage balance. In some cases the lender will ask for a contribution towards the loss to allow the transaction if the seller can afford the mortgage or has liquid assets to help offset the loss. 95% of our clients end up owing nothing as a result of the sale and the balance of their loans are forgiven. Some clients are offered a relocation incentive to help with moving expenses, these amounts range from $1,500 to $10,000 if the seller qualifies.

 
  

STAGE 5: CLOSING

 

TIMEFRAME: 30 DAYS

 

GOALS:

-Establish Closing Date

-Coordinate Seller Relocation

-Monitor Deadlines

-CLOSE!

 
 

Once the approval letter is in hand we will coordinate with the Buyer, Buyers’ Lender, and the Title Company to work through the steps to get to the settlement table. At this stage the buyer should only have to complete their appraisal and work through their financing requirements. The seller’s only responsibility during this stage is to move if they haven’t already. We will monitor deadlines given by the mortgage holder in the approval letter to be sure we are fully compliant with their requirements. The negotiator and title company work to make sure all of the necessary paperwork is filed and the loans are released per the terms of the approval letter.

 

Please feel free to contact us to discuss the short sale process in greater detail. Each set of circumstances is different and it is important to discuss your situation with an experienced short sale Realtor to be sure you are equipped with the knowledge and preparation to put you in the best position for a successful transaction.