Short Sale Process

Here is what you can expect when you pursue a short sale with our team. Our proven system puts you in the best position to obtain a short sale approval with your lender.

The Preparation Steps

The homeowner should always start by calling their lender to explore what options may be available to them with the lender.

We schedule a phone consultation appointment with the homeowner where we ask specific questions to understand both the circumstances of the home, the homeowner AND if the homeowner wants to stay in the home or move out. The appointment is scheduled for a time with all homeowners can be on the call. We suggest you read Short Sales FAQs for information prior to the phone appointment. When you read the Short Sales FAQs and short sale process, the call typically takes just 20 – 30 minutes so it saves you time.

Sometimes a homeowner initially chooses an option we cannot directly help with today. Whether you choose an option we can directly help you today with or an option that takes you in a different direction, the homeowner receives information to help them move on to the next step. NOTE: Often a short sale is a “Plan B” when other options donít materialize and foreclosure is imminent.

When a homeowner decides that a short sale is their desired option, we send them a list of all of the documents that will be needed as well as the forms we will need during the short sale process. Our package will also include a list of things that can be done for little or no cost to put the home in the best condition for marketing photos and to ultimately obtain offers.

We will complete a Comparative Market Analysis (CMA) on the home to determine the price that should cause the home to get traffic. We will then send the contract to list the home for sale along with the required disclosures.

After the homeowner returns the completed paperwork to us, we schedule an appointment to visit the home to take photos, install the lockbox and answer any remaining questions.

We will prepare a damage and repairs report in order to document any issues with the property that may need to be used when negotiating with the lender.

The Marketing Steps:

We list the home for sale in the MLS as a short sale and a FOR SALE sign will be installed. NOTE: The sign in the yard will NOT say Short Sale. NOTE: Some agents do put a Short Sale sign on the home but we find our clients don’t want their neighbors to know their situation.

We then begin our extensive marketing strategy which includes massive exposure on the internet on over 200 different sites as well as off line marketing.

We establish communication with the lender on your behalf.

The property will be shown as much as possible and the asking price will be lowered every 15 days – 30 days (on the 1st and 15th) until a viable offer is received, as shown in our listing paperwork. This is important because price brings showings and showings bring offers.

All offers are reviewed by our team and then forwarded to the homeowner for consideration. We discuss each offer with the homeowner and the homeowner selects the offer they like best and signs the complete offer. This signing creates a legally binding contract that is Subject to the homeowners’ lender’s approval.

NOTE: Some listing agents submit all received offers to the homeowner’s lender and expect the lender to choose the offer they like best. However, according to the CAR (California Association of Realtors) attorneys, a seller should NEVER sign more than one offer at a time. Since lenders typically want a contract (namely an offer that has been signed by buyer and seller) to process a short sale submission, to send an unsigned offer to the homeownerís lender does not generally work.

The Lender Negotiation:

We add the contract that has been signed by buyer and seller to all of the previously collected documents to create a complete package for submission to the lender for short sale consideration. We submit to the complete package to the homeowner’s lender.

NOTE: The lender needs the most recent copies of bank statements, paycheck stubs and tax returns for all homeowners. These items would generally have been collected from the homeowner prior to listing the home for sale. However, some time may have passed between the time of the listing and the receipt of an acceptable offer so documents often need to be updated. It is critical to provide these items promptly to us because the buyerís offer has an expiration date so every day counts!

After the package is submitted to the lender, the homeowners lender needs time to review the information and run it though their approval process, A good rule of thumb for this process is 4-6 weeks for a first lender and then 2-4 weeks for each additional lender, though it could be longer depending on the lender.

After the lenders review of the package, one of three things can occur. The first possible outcome is where the lender accepts the contract as is. When the contract is accepted by the homeowner’s lender, they will issues a Short Sale Approval Letter and the buyer will be informed that the closing can begin and escrow will be opened. The closing will be scheduled with an escrow/title company and the buyer will make any final inspections during the inspection period of the escrow. Utilities should remain on so that the buyer can do their inspections.

Once the buyer completes their inspection period and agrees to complete the contract, the buyer and homeowner will sign their required documents individually at the title/escrow company.

The homeowner will vacate the property and leave it broom swept and completely empty, unless otherwise specified.

The lender issues a mortgage satisfaction and the document is recorded in public records.

Keys and remotes (if any) will be given to the new homeowner by our team after we receive confirmation of the recording making the buyers the new owners of the home.

The second possible outcome is when the offer is not accepted by the lender so the lender makes a counter offer. When that counter offer is accepted by the buyer, the process will continue on as outlined previously. When the buyer does not accept the terms of the homeowners lender’s counter offer and no agreement can be made, then the property goes back on the market to await a suitable buyer. NOTE: The homeowner’s lender still has the right to foreclose on this home until the lender issues a Short Sale Approval Letter.

The final possible outcome from the homeowner’s lender is that they reject the short sale. This occurs for a variety of reasons. The most common reasons short sales are not approved are incomplete package submission, lack of a homeowner hardship, unreasonable price requirement from the lender or the buyer walks from the home prior to receiving an approval letter. Experience shows that by following our process, the success rate of obtaining an approved short sale for our clients is in excess of 95%. Your agents’ skill and experience in short sales is CRITICAL so choose your agent wisely.

To make the process easier to understand and navigate, a homeowner benefits greatly by contacting a real estate professional who specializes in representing distressed homeowners. Contact us today to schedule your Initial Phone Consultation and get answers on your specific situation.

Please contact us or call 916-939-2040

Smith Real Estate Services, Inc.is a real estate brokerage company in California (DRE 01381095 and 00676207). We do our best to provide you with current and accurate information. However, we are not attorneys or accountants. Please consult with your attorney or CPA for further information and how this information may affect you personally. Visit our Resources for a list of professionals who specialize in helping distressed homeowners. This was written in October 2011.