What is the Short Sale Process?
Hi there, Lambros here with Ark Law Group and I'm here to answer your questions.
The question of the day is, What is the short sale process?
I'm going to go over the short sale process step by step starting with point number one.
1. Meet with a Consumer Debt Attorney.
You want to be sure to meet with an experienced attorney to help you explore all of your options. They'll go over your specific loan. They will talk to you about your lender and their nuances. They'll go over borrower reports, borrower financials, income, expenses etc. to help you determine the appropriate course of action moving forward.
Which leads me to step number two.
2. Determine the Proper Course of Action.
If you talk to listing agents or mortgage loan originators, bankruptcy trustees, they are all very myopic in terms of the services they can offer. They'll tell you to liquidate, attempt to refinance, which isn’t likely. Or just discharge your debt in bankruptcy. That is because that is the only way these guys get paid.
If you are dealing with a well-rounded experienced consumer debt advocate they will help you explore all of the options available to you including home retention options.
3. List the Property.
At this point you want to be sure to get paired up with one of our premier partners, an experienced listing agent who knows what they are doing. Who can get the property listed, get it on the market and get you an offer quickly, which can be extremely important in light of a trustee sale.
4. Negotiate Your Debt.
Once you have the offer, you want to be sure you have a team of experienced professionals. A team of experienced mortgage debt advocates who are engaging the lender on your behalf and optimizing your chances on getting approval from that lender.
Once we have approval...
5. Close the Transaction.
Once the lender issues that approval letter, you want to be sure you have an attorney who is well versed with approval letters to look for that specific deficiency waiver language. That will ensure you are no longer on the hook and you are no longer personally liable for any remaining balance owing after the short sale.
In order to optimize your chances of successfully navigating the process you want to be paired up with experienced mortgage debt advocates.
More on the short sale process
For those of you who would like to know more about the steps that go into doing a short sale, we’ll do a deeper dive into the full process here.
The short sale process can differ slightly depending on your lender(s), the state you’re in, and whether you’re braving it alone or with professional help.
We’re going to do a general overview of the short sale process, including the role our team plays in short sales for our clients, so you can have a better understanding of how it might really work if you decide to do a short sale on your home.
Step 1 - Listing your homeOnce you’ve decided to do a short sale on your home, the first thing to do is list your property.
Now, you might be wondering, “Shouldn’t I talk to my lender first? Don’t they need to agree to the short sale?”
You’re not wrong. They definitely need to approve your short sale.
But, in all honesty, in most cases if we approach a lender before we’ve gotten an offer and say, “John Doe owes more than what his home is worth, and he wants to do a short sale,” the lender will simply say, “Show me the money. Get an offer.”
Think about it from their perspective for a minute: if they’re looking at foreclosing on a home, they might already have a course of action in place, and the prospect of a short sale might not be all that appealing in the hypothetical sense.
But if the homeowner comes to them with a solid offer of X dollars in exchange for wiping the debt clean, all of a sudden it’s much more tangible for the lender. They can easily see how they can recoup their losses and avoid the messy procedure of having to foreclose on a home.
(The banks don’t actually like foreclosing, FYI, it’s very expensive on their end. And in certain cases, where a foreclosure is imminent, there are legal actions we can take to halt the foreclosure while we start the short sale process.)
So the first thing to do is list the home.
We actually have an entire network of experienced listing agents that we trust to help our clients get the best offer possible for their homes.
When a distressed homeowner like yourself reaches out to us to assist them with a short sale, we’ll connect you with a listing agent who will take care of listing, staging and marketing your home - they’ll do everything it takes to get an offer on the home.
Step 2 - Collecting financial documents
While your home is being listed, there are a few documents we’ll need from you in order to prove your financial hardship to the bank so that we can warrant the short sale getting approved.
Once you complete the document package, we let the listing agent do their job.
Step 3 - Get an offer
The broker will show the property, review the offers that come in, and finalizes the contract with the buyer.
As soon as you get that top offer, our team jumps in to negotiate with your bank on your behalf.
Step 4 - Submit the short sale package
We’ll compile the offer along with all of your financial documents into a complete short sale package, which may include updating some of them, if it’s been a while since the process was started.
Your Case Manager here at Ark Law Group will review the file and, when it meets our requirements, submit the package to the lien holders.
That’s where the real excitement begins - at least for us.
Step 5 - Negotiation
The negotiation portion of the short sale process can definitely be the hardest for homeowners, which is where our expertise is put to its best use.
We’ll be doing all the heavy lifting for you - you won’t have to talk to the bank, explain your situation to a bank rep who’s trying to shake you down for money, none of that. We’ll take care of all of that, but just know that negotiating short sales is not for the faint of heart.
All you’ll need to do during this bit is hang on for a bit.
The buyer will also need to know that they’re going to have to sit tight for a while, too. They’re going to get a great deal on the home, but it’ll take a bit of time.
To be honest, if the negotiation could be done overnight, homeowners would do short sales themselves, and we’d be out of a job!
Once the bank receives the offer, there’s going to be a lot of back and forth. There will be value disputes, they’ll counter-offer the offer, then we might have to get a new offer, or else do a lot of paperwork to show why they should accept the buyer’s offer. This paperwork might include the fair market value, letters of explanation, further clarification about your situation, and the like.
All of this back and forth is what makes short sales take so long, once you’ve got the offer. There’s nothing short about it.
During the negotiations, we’ll keep you up to date on what’s going on, what the latest word is, and what to expect next. You may have to provide updated financial documents throughout the process to continue to prove your financial situation, but we’ll let you know what is and isn’t needed from you in that respect.
Deficiency balances and deficiency waiversA vital part of negotiating your short sale is ensuring that you aren’t stuck with the deficiency balance - how much is still owed on the house after the sale price.
For example, if you owe $300,000 on your home, but its short sale price is $250,000, the deficiency balance would be $50,000.
Getting the short sale offer approved by the lender isn’t actually the hardest part. Getting them to drop the deficiency balance is where negotiations can get especially tough, and why it’s so important to have a team of experienced professionals doing the heavy lifting for you.
Our goal is to get every last penny of your debt resolved, and we always fight to get our short sale clients’ deficiency balance forgiven with a deficiency waiver.
Relocation incentivesOne other thing to consider when looking at a short sale is that there are multiple programs, including the government’s HAFA program, that offer relocation incentives for homeowners doing short sales.
If you qualify for HAFA, the government will actually pay you $10,000 as a relocation incentive for doing a short sale.
If you don’t qualify for HAFA, there are other options in terms of relocation incentives, and if you need financial help to get into your next home, we can negotiate with the bank for the cash you need.
Most lenders actually prefer helping sellers with incentives of $1,500 or $3,000 to the much larger sums they’ll end up paying to do a foreclosure (where they’ll usually end up getting much less for the home than they would in a short sale anyway).
Once the offer and the settlement terms is accepted by the lien holders, it goes into closing.
Step 6 - Closing
Escrow prepares and completes the final closing documents, you collect any relocation incentives, and move on.
How long does the short sale process take?
All in all, the short sale process can take up to six months or more, depending on how quickly you get an offer on the home, and how fast the negotiations can be completed.
But the listing of the home, collecting the documents, preparing and submitting the documents - the rest of the process - that can all usually be completed in under two weeks. Finding a buyer can often take months, as can the negotiations, and the closing usually takes 30-45 days.
The name is misleading - a short sale is never short.
The name “short sale” actually comes from the bank getting shorted on what they’re owed.
Do I really need an attorney to help me get my short sale approved?
There are short sales that get approved without an attorney handling the negotiations.
But ask yourself – what do you really need in life?
Do you need to get out of debt?
Do you need to move on and leave your upside down home behind?
Do you need to not get stuck with the deficiency balance?
Do you need the bank to accept the offer you have, because it’s the best you’re going to get?
Do you need a relocation incentive?
Using an experienced real estate professional to push through your short sale can make all the difference in tough times. Our attorneys are here to fight for you.
What do you want?
More time in the home?
To get it over with quickly?
Cash to help you and your family move on, and adjust to your new home?
Ark Law Group wants you to be out of debt and stress-free. Call to get your free consultation and find out what you could get from a short sale.