Short Sales FAQ
Short Sales FAQ
Is it true that short sale contracts never go through? That is absolutely untrue. Short sales can and do go through. The secret is in the quality of the offer and the contents of the short sale package. Short sales got a bad reputation from the beginning. This was because they were being attempted by people who were not sure of what they were doing. If the offer is not within the range of acceptance by the bank and the bank does not have all of the information they need, it will not go through. Make sure that whether you are a buyer or seller, you only trust the transaction to someone who is highly educated in short sales and knows how to navigate them.
Can I put a way lowball offer in and get a "steal"? A bank is not going to take a dramatically lowball offer. There is a percentage of net proceeds that is within their acceptance range. The key is getting your offer in at the bottom price that they will accept. If you put it in lower than that, the bank will chose foreclosure over releasing the lien and allowing a short sale transaction to proceed. Your offer must be "smart" or you are wasting your time.
How does the bank decide what the FMV is on the home? It depends on the bank. Some banks do this through a BPO and some do it through an appraisal. Many times the value comes back unrealistically high and your agent has to be prepared to show the bank that the home is not worth the inflated value.
What if I CAN make payments, but just don't want to anymore? Then you should just continue to make payments until you can sell your home. You are probably not a candidate for a short sale, as the bank needs to see hardship and an inability to pay. You may, however, be an excellent candidate for a short payoff. This would allow you and the bank to negotiate an unsecured note for the shortage in exchange for the bank releasing the lien so you can get out from under the home.
I'd like to do a short sale but my ex-husband/ex-wife just wants to let it foreclose. Can we still do a short sale? A short sale can only be done with full cooperation of all parties. Remember, he/she will have to cooperate in providing all applicable paperwork to the bank, and they will have to sign the contract and all closing documents.
Can I just put a really low price on the home to get in a buyer? We need to list the home for Fair Market Value. It will not do you any good to put a unrealistic price and get an offer for that price. The bank will not allow that. Remember, the bank is the one taking the hit. The bank is going to be careful about the size of the hit, and if they can get more in a foreclosure sale, they will opt for that.
What kind of paperwork will I have to provide to the bank? Qualifying for a short sale is like qualifying for a loan in reverse. The exact list is different depending on the bank. Usually you will have to provide bank statements for the past few months, tax returns for the past couple of years, a complete financial statement, and a hardship letter. The paperwork needs to be provided at the same time as the listing agreement. Every month when you get new bank statements, they should be forwarded to us to keep in your file. Everything must be ready to go the second we get a signed contract.
Since the bank is willing to let the house go for today's market value, can my brother/cousin/aunt buy the house from me in a short sale so I can buy it back for a more realistic value? In short, no. Banks are very sensitive about this. They don't mind a complete stranger getting the home for cheaper, but they will not allow a family member to do this. They will make the parties sign an affadavit that there is no relation. To lie about this is fraud.
Can I put in a contract on a short sale today and move in a month from now? Probably not. It is possible, however, you need to go into a short sale expecting no less than a 60 day turnover. We have seen short sale approvals take only a week (HIGHLY unusual), but we have also see them take longer than two months. Your short sale package MUST be put together correctly and go with the offer to minimize the time needed for the bank to give approval. You should not even make an offer on a short sale unless you have the level of commitment to see the contract through to the end. Remember, the seller is taking the home off of the market and moving closer to foreclosure. It is very irresponsible for a buyer to not take this seriously.
How is Fair Market Value determined? We do a very detailed analysis of fair market value for short sale properties. We start the home as close to fair market value as we can get. Remember, true FMV is the point that a willing buyer and willing seller come together. The market will either accept or reject your price. We have to regularly drop the price every week or two until we get an offer. The market has been trending down. You have to be willing to continue to reduce the price of your home until activity is where it needs to be and we get an offer. We can't put a price on the home, and leave it there ignoring what the market is telling us. To do this would be wasting your time and ours.
How do I pay you for your services? Our commission is part of the listing agreement. There is nothing to pay us up front. It becomes part of what the bank takes a loss on to release the lien. You will not have to pay out of your pocket if you are short.
When I list my home with you, does that mean I have to stop trying to get a workout with my bank, or stop trying to refinance? No. We believe that the best solution for everyone is keeping everyone who can stay in their own homes. We wish everyone who wanted to could keep their homes. We always encourage you to try to find a way to keep your home, even after we've started the short sale process. However, after we are under contract, you have a contractual obligation to sell your home if your lender approves.