Most people are not accustomed to selling real estate and not having to pay anything. This is especially true if you owe more than your house is worth! However, if you work with us in a short sale context, that is exactly what happens.
You never pay us anything, guaranteed. The short sale lender covers all of our fees through sales proceeds. Why are they willing to do this? Because they net more through a short sale than their next best alternative – i.e., foreclosure. The legal costs, carry costs, property management and repairs, lower sales price from the stigma associated with a foreclosure….it all adds up to a motivated lender that is willing to settle for less than what’s owed.
The following is a brief description of our process. More details can be found here
First, we gather all the documents we know your lender will need to process the short sale. While these forms vary somewhat from bank to bank and over time, the same basic package is needed on every deal.
Second, we find a buyer who is willing to make an offer on your property. The lender requires that we submit an offer in order to consider doing a short sale.
Third, we submit the entire package to the lender’s loss mitigation department, and then follow up like crazy. Missing documents is widely flagged by lenders as the number one reason why loan modifications and short sales fail. (We may have our own opinion on that, but we’ll leave that one alone for now!) Persistence and patience are key to overcoming this initial hurdle.
Fourth, the lender will order what’s called a broker price opinion (or BPO) or appraisal. We of course will meet the bank’s agent at the property, and provide truthful information to ensure he does his job properly and accurately represents to the lender the value of your house. Keep in mind – if the bank’s agent overstates the value, it will substantially jeopardize the likelihood that the short sale will succeed.
Fifth, a negotiator at the bank is assigned to work your file. This representative will dicker back and forth on price, terms, fees, etc., but will (hopefully) ultimately be the one responsible for issuing what’s called an approval letter. This document is the bank’s sign off that allows the property to be sold for less than what is owed.
Sixth, the transaction moves to a traditional settlement, complete with an appraisal for the buyer, underwriting, title work, and so on. Finally, we settle and you the homeowner are done!
Now, a very important distinction exists between a release of lien (the lender’s recorded security interest in the property, evidenced by a deed of trust or mortgage that is recorded in the land records), and a release of liability (the obligation you took on when you signed a promissory note for the full balance of the loan). The lender has to release the lien in order for a short sale to go through, but they don’t have to release the liability. If they don’t, they can pursue you for the difference between what is owed and what they net from the sale.
That’s why it is SO IMPORTANT to have a short sale expert on your team who knows how to negotiate with the banks to secure both releases. While it is not always possible to get the bank to agree to a full satisfaction of the debt, that should be the goal of the negotiator on every single deal (at least that’s