Short-Sale Processing

The Short-Sale Process

When an agent prepares your purchase agreement to be uploaded to the bank – there’s a lot more being added to it than just your purchase agreement.  We call this the short-sale package.  It includes all the necessary paperwork required by the lender to determine if this property, the seller, is a viable option for a short-sale.

Hopefully, if the agent is competent about short-sales, the short sale package that's submitted to the lender will be very complete, documenting the inability of the homeowner to continue their mortgage payments.  The lender should get a clear picture from the numbers in the supporting documents that the borrower is heading toward foreclosure and/or bankruptcy.

What does the lender do with this package?  The numbers are analyzed and verified.  The borrower's ability to pay the mortgage is calculated with these new numbers, usually showing the hopelessness of the situation.  The lender then derives a value for the property and compares that value to the amount due on the mortgage and the offer from the purchaser.

With the average cost to a lender for foreclosure running around $50,000, there is some incentive for them to consider a short sale offer if the numbers work.  The may use a AVM (Automated Valuation Model) or a BPO (Broker Price Opinion) or both to determine the price at which they could sell the property in foreclosure.

If the lender sees the possibility of recouping more of their investment from the short sale route, they may very well approve it.  After all, the process will be less costly, and it will be completed sooner than a foreclosure.  The lender's assets to hold reserves to back up this loan will be freed up sooner.

As an investor, seller or a real estate professional, we've put a huge amount of time and effort into preparing a short sale package and sending it along to the lender.  We have gathered all types of information and documents, including financial statements, medical bills, divorce decrees, tax returns and we don't waste an excellent package with poor lender relations.

We work with a department called "loss mitigation.”  Loss mitigation explains their goal - mitigating how much money they lose on this loan.  It's not about how much money the homeowner is going to lose.  From our first contact with the lender, we’re courteous, but professional.  We send along a written authorization from the borrower for us to work with the lender.  Sometimes we make the first phone call with the borrower present to verify details with the lender's representative.  From the first phone call, we always assure the lender that we’ll be available to answer questions or gather more information. If the short sale package was thorough, it is likely that we will just be waiting for an approval.