Categorized | Short Sales

Short sales don’t have to be Horror Stories

Posted on 15 September 2010 by Aaron Hofmann

A couple years ago, very few people had heard of short sales. Now everyone seems to have hear a horror story about the process, whether a seller or a buyer. A short sale transaction can take months to be approved and closed. While short sale approvals can be completed in a short timeframe, the reality is that short sales usually take three to four times as long as a regular sale to finally get to the closing.

Our number one tip for both buyers and sellers is to be patient and flexible. Each transaction has its unique attributes.

For conventional loan short sales, it can take anywhere from 30 days to 6 months for lender approval. Click here for more information on FHA short sales.

Buyers

For buyers, the first step is to make sure you’re working with an Atlanta Realtor that specializes in foreclosures and short sales. A lot of advice always points to making sure that the listing agent is an expert, but if the Realtor representing you as a buyer’s agent is very knowledgeable in distressed properties, you will become frustrated very quickly.

Identifying the right property and understanding expectations up front is important. Your Realtor will be able to assess whether the property is priced where it’s more likely for the bank to accept or whether the price is completely out of line. We’ve seen a growing trend where listing agents will reduce the price of a property the last few weeks before foreclosure in an attempt to get an offer, but this is merely a “teaser” price. They’re trying to stall the foreclosure and buy their clients some time, but along the way they’re misleading buyers.

So it’s very important for your Realtor to investigate a home that you’re interested in making an offer on to determine the likelihood of a bank approving the short sale. They will need to interview the listing agent to ensure they have the adequate training, experience and proper documentation to see the short sale through to a successful completion.

Once you have a contract with a seller, it will be contingent upon the bank approving it. They’ll review all the hardship documents to ensure everything is complete. The next step will be to assess the current value of the home. They’ll either order a broker’s price opinion (BPO) from a real estate broker or an appraisal from a certified appraiser. They’ll compare the offer price to the outstanding loan balance and to the current value attained from the BPO or appraisal. The unfortunate thing for buyers is there isn’t much communication from the bank during this process so buyers are left waiting and wondering. If you go into it with the right expectations, this won’t be an issue.

Once the bank has approved the short sale, they’ll generally require it to be closed in 30 days. This is where flexibility is key.

Sellers

If you’re a seller, you also must be patient and flexible and do your homework upfront. Most critical for you is to ensure you’ve compiled all the required documents and have them updated when you’re ready to submit a buyer’s contract on your home. Many short sales get delayed due to incomplete files or outdated information.

Lenders take their time while responding, but when they do, they usually give a 72 hour timeframe to respond or provide the missing documentation. If the documentation is not provided within the specified timeframe, it usually ends up in a closed file. Another common situation that is happening very often is borrowers being served with foreclosure paperwork from either the lender or Homeowner’s Association while the short sale is being processed.

If this happens, you need to communicate this to your listing agent as soon as possible. Foreclosures and short sales are parallel processes and one does not cancel the other. Sometimes a short sale might delay a final sale date, but it will definitely not stop the lender from starting the foreclosure proceedings.

Once you have a contract and have submitted all hardship documents, you are in the same boat with the buyer. You wait. Be patient and flexible. Once the bank has come back with an approval, you’ll need to review to ensure you are satisfied with the terms of the short sale approval.

While short sales can be frustrating for buyers and sellers, it doesn’t have to be. Our team specializes in short sales and foreclosures, so we see the issues on a daily basis, know how to react and counsel you on these items and assist you in either avoiding foreclosure if a seller or finding a great deal if you’re a buyer. We are Certified Distressed Property Experts, trained specifically to deal with Atlanta short sales and foreclosures.

You can contact your Atlanta Short Sale Realtor for more information or to schedule an appointment.

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