What is the Short Sale Process?

The starting point in a Short Sale is probably when the home owner realizes that, due to some kind of hardship, their expenses are now greater than their income and something needs to change in this situation since it cannot be sustained much longer.

The homeowner starts identifying their expenses and naturally the mortgage payment(s) is one of the largest draws to their budget. If they could get out from under those mortgage payment, they could start their financial recovery.

They meet with a qualified Real Estate agent that has Short Sale experience and a successful track record in performing Short Sales and asks if they may be a candidate for a Short Sale.

First we determine the hardship, what has changed in their situation that is causing a problem with remaining current on their mortgage payments. Ultimately the lending institution will determine if, in their eyes, they agree that there is a hardship.

We typically ask our clients four questions:

1. In the current market, has the value of your home dropped. This has to be more than the homeowner's opinion and must be backed by actually data. We can provide you with a comparative market analysis that shows if your home's value has dropped.
2. Is the homeowner behind on payments?
3. What is the homeowner's hardship?
4. Does the homeowner have any other assets that may be used to pay the mortgage?

If it looks like the homeowner qualifies, and the homeowner decides that this is the best way for them to avoid a foreclosure, then the home is listed on the MLS just like any other listing. Within the contracts signed for the listing, the state of Colorado will also require the new Short Sale addendum contracts be included. These addendum protect the homeowner.

The homeowner's primary decision is whether they want to perform the Short Sale. Once this empowering decision to move forward is made by the homeowner, then the Lender is the one that will make all final decisions regarding the sale of the property, since they are the ones that will accept the loss on the sale of the property, and the Short Sale is more beneficial than the cost of foreclosing on the homeowner.

This is where our teams experience and our historic data is invaluable to the success of the Short Sale. We have to price the home so it is acceptable to the Lender, while at the same time the price is low enough to quickly attract a buyer or investor.

Once we have a buyer under contract, than the real work begins. We put together a package with the documentation required by the respective Lender and this package (which can range from 40 to over 100 pages) is faxed to the Lender. After that we are constantly monitoring the process, we're in constant contact with the Lender, making sure that they have all of the documentation they need, making sure that if there is a foreclosure sale date that it gets moved out, and basically following up and negotiating with the Lender until we have approval to proceed with the Short Sale. It would be impossible to succeed with this without our team's full-time negotiators driving the process.

When the bank's Loss Mitigation department gives their approval, then a Closing date is scheduled for the Short Sale.

In the next installments we'll discuss “Why would a Lender Accept a Short Sale” and the cost of a Short Sale – how it impacts your credit, what a deficiency judgment is, and what other actions the bank may take against you as a result of the Short Sale.