3 Things That Will Slow Down a Short Sale
A short sale is defined by the National Association of Realtors as “a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner.” Often they occur because the home is worth less than what is owed on it.
Knowing what a short sale is certainly helps in understanding the emotions that may be behind the sale, but it’s equally important for you to consider some of the factors that could impede your client’s purchase or selling of a short sale property.
With the average short sale taking three to six months, patience and preparation are key to a successful transaction. It’s important the buyer and seller understand the processing time is different than a traditional sale.
Short sale requests can be delayed by a number of factors, the most significant of which are low offers, incomplete paperwork, and last-minute negotiations from the bank. If you’re representing the buyer, you need to help them make a reasonable offer by educating them on the process and managing their expectations. The seller’s agent must ensure that all necessary financial materials and paperwork are submitted to the bank’s expectation. Even doing those things on both sides, there’s still one more impediment that can delay the short sale–the negotiator.
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Factors That Slow Down a Short Sale
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Low Offer Price
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Incomplete Paperwork
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Last-minute Negotiations
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Contrary to popular belief that short sales are made with pennies on the dollar, the average discount for a short sale property is 17 percent, so it’s important the buyer make a reasonable offer. Provide them with comparable sales because the bank will consider both appraisals and/or a broker price opinion (BPO) when deciding whether to sell a home. Also, the bank may sit on the offer, waiting to decide until after they’ve received multiple offers. Set this expectation. If it doesn’t happen, even better.
For the bank to approve the short sale offer, the seller must provide a complete picture of their financial status. This entails providing all required documents, including bank statements, paystubs, tax returns, financial analysis forms, and a hardship letter. If anything is missing, the sale could be delayed.
That said, banks are inundated with paperwork, and they sometimes lose documents, placing the onus on the seller to keep copies before sending the materials. Plus, each lender is different. Make sure your client understands what documents are required.
These should be sent together in one packet. The seller should give their agent the ability to speak with the lender. The agent should check weekly on the status and communicate that information to the seller and the buyer’s agent so that the buyer remains interested and informed.
This is the wild-card moment in the short sale. The buyer’s agent has managed their client’s expectations and kept lines of communication open. The seller’s agent has ensured that the paperwork is complete and processed.
Now the bank negotiator may try and renegotiate the price or ask the seller to contribute money to the transaction. There are no rules they need to follow, and there’s no predicting what they will do.
If you’re involved in a short sale property transaction, be prepared for a long process. You’ll also need to exercise your communication skills as all parties should stay in touch weekly. It’s important to do your part to respond to all requests in a timely fashion because there’s always foreclosure looming on the horizon and that would cause the process to start all over again.
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