LOTUS REALTYGROUP
THE FIVE STAGES OF THE SHORT-SALE PROCESS
STAGE ONE: LISTING AND PREPARATION
Once you have pre qualified the homeowner and they are in fact a candidate for a short sale, then it is time to start collecting the paper work and listing the home. The goal is to accomplish 80% of the paper work at the first meeting. You should send the short sale package to your client via email before your appointment and set the expectation. Request that they read the disclosures carefully, fill out all of the forms and start gathering the following:
(Short sale package)
- Signed short sale disclosures ( Acknowledging they have read and understand the process)
- Signed authorization ( With loan numbers)
- Information gathering sheet ( Loan information)
- Financial statement ( Assets and Liabilities )
- Monthly expense sheet
- List of repairs ( Pictures if noticeable)
- Hardship letter ( Signed and dated)
- Most recent two years tax returns
- Most recent two months paystubs (If self –employed, have your client fill out a profit and loss statement for the last three months)
- Most recent 2 months bank statements
- HOA Statement ( I would advise your client to continue making the HOA payments)
- Mortgage statements
- If there are any documents the home owner cannot provide, a letter of explanation will suffice
- Signed listing agreement
- Signed schedule of price reductions ( These occur on the 1st and 15th of the month, there should be a total of three)
STAGE TWO: MAINTAINING YOUR LISTING
We want to create a listing history with the lenders. It is our job to show the bank we are working to get them the highest and best offer. Typically, the bank has an idea of what they think the home is worth however, in most cases the lenders value is not in line with our market. We want to start the listing at what is owed on the mortgage and come down slowly. Have two to three scheduled price reductions (1st and 15th of the month). Once you get to your final price reduction you will be at the market and drive in the offers you need in order to submit a complete package. Ideally we want to see 3-5 showings on average per week. This gives us the opportunity to gather everything we need to submit a complete package. At this stage we start the following:
- Make the initial contact with the lender, faxing over authorization and ordering payoff statements.
- Request from the lenders their specific short sale requirements.
- Keep communication open with the lender. You should update your client weekly on the progress of the listing.
STAGE THREE: ACCEPTING AN OFFER
The most common issues with buyers writing an offer on your short sale listing are the following:
- They are not qualified buyers.
- They are putting in multiple offers all over San Diego County so by the time we get the approval; the buyers have purchased another property.
Here is a solution to help minimize the chances of this occurring:
- Have the buyer get DU approval through a lender you trust. The lender I use collects all of their documentation up front to start the DU process. This will tell us if this buyer can in fact purchase this property. Furthermore if the buyer is willing to go through the DU process then we know this is the home they want. Typically the bank wants to see an offer at 80% of the balance of the loan. This is not always the case however our goal is to get as close the number as possible.
STAGE FOUR: SUBMITTING A COMPLETE SHORT SALE PACKAGE
We never want to submit a package unless it is 100% complete. If we do not submit a whole and complete package it will be lost under a sea of other files or it will be tossed in the shredder by a tired representative. This is a complete package;
- Table of contents
- Short sale cover letter
- Signed authorization
- MLS Listing sheet
- Hardship letter (signed and dated)
- Asset and liability sheet
- Expense sheet
- Most recent 2 years tax returns
- Most recent 2 months paystubs or profit and loss sheet for last three months
- Most recent 2 months bank statements
- Comparative market analysis ( with 3 active, 3 pending and 3 sold listing sheets)
- List of repairs (pictures if noticeable)
- List of detrimental factors
- Listing agreement ( no electronic signatures)
- HUD
- DU Approval
- If this is a CASH buyer, provide proof of funds
- Fully executed RPA ( no electronic signatures)
- Copy of good faith deposit
- Preliminary title report
- Termite report
Submitting the Short Sale Package:
Verify the fax numbers and address. Fax complete package and mail it to the lender. Follow up 24-48 hours to confirm receipt. Once a package has been submitted, it takes 7-10 days to get imaged into their system.
Getting assigned a negotiator:
Once assigned, the negotiator typically calls to introduce themselves and set expectations.
Broker Price Opinion (BPO):
This is a person, typically a realtor the lender sends out to give an opinion of what the home is worth. Once this has been ordered and completed, the value is in review. This can take anywhere from 7-10 days. Once the negotiator has everything they need the file is submitted to the investor for final approval. This can take up to 3 weeks.
Lender follow up:
This is a crucial part of the process. We typically follow up every 3 days to keep the file in front of the negotiator. Lenders have a huge turn around in employees and sometimes a file can be tossed around. We need to know where our files are at all times.
Buyer and buyer’s agent follow up:
We like to keep the lines of communication open with the buyer and the buyer’s agent. Informing them of any new break through’s in the process once a week. Even if there is nothing new to report we want to make sure the buyer knows we are doing our best to make this a win for all parties involved.
STAGE FIVE: APPROVAL
Once the lender has issued an approval they want to close it as soon as possible. It is crucial to have a team of professionals that is experienced in these types of transactions (Escrow, Title, negotiators, and preferred lender to qualify buyers) who can avoid pitfalls and ensure closing. Most approvals are good for 30 days. We want to make sure we have the right buyers and are able to move forward quickly. In most cases we can get extensions however we want to avoid that. Some lenders will give an extension but charge a per diem for every day we do not close on time.
The goal is to close these transactions faster. If we are following a systematic structure, knowing the boundaries to stay in and guidelines to follow:
- Qualified sellers
- Listing history
- 100% complete packages
We will be able to accomplish this and get you what you want in the time you want. Won’t that be great!
LOTUS REALTY GROUP
PROFESSIONAL SHORT SALE NEGOTIATORS
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