Updated Letter to Buyers and Buyer Agents...
Dear Agent/Broker:
Thank you for your offer on my short sale listing. I will do everything in my power to make this transaction smooth and hassle-free.
Just to be sure we are on the same page with all that's involved in a short sale; I am sending you this overview. If you have any questions, whatsoever, please give me a call. The two most important aspects of the transaction will be cooperation and patience.
What is a Short Sale?
A short sale occurs when a lender is willing to accept less than the full mortgage pay off. They short the loan and allow the Borrower's debt to be forgiven.
A property is a candidate for a short sale when all liens, plus costs of sale, exceed the market value. Those liens include mortgage liens, mechanics liens, tax liens, unpaid judgments, and unpaid HOA fees.
What are the steps in a short sale?
There are hundreds of steps to successfully completing a short sale. It takes an incredible amount of time, effort, and expertise to negotiate with the lender and get the job done.
Here is a brief overview of the steps to a short sale:
The short sale package completed by my team, including the buyer's offer is submitted to the mortgagee. Once a buyer is found and the contract is executed, it's time to submit the "short sale package" to the lender.
The Borrower's lender will order an appraisal or Broker's Price Opinion (BPO). The purpose of the BPO is to determine the property's fair market value. This will be the pivot point for the lender's negotiation.
The lender either approves, rejects, or counter's the buyer's offer. Usually you can expect the lender to make a counter offer. Just remember, the lender has the final say and must approve the sale.
This process can take a month, or several months depending upon many factors. It's important for all parties to know that this is a lengthy process and that patience is a virtue.
Why would a lender agree to accept a short sale?
Studies have shown that the cost of a foreclosure to the lender is almost $60,000 and could take up to 18 months. You can understand why the loss of a short sale may be less than the cost of foreclosure.
Simply because the lender looks for a short sale to avoid the costs in a foreclosure does not mean that all short sales are accepted. When my team prices a home, we believe based on our formulas and calculations that this is close to, or at what the lender will look for as a settlement.
Here are the recommendations of the Buyer's Realtor:
- Educate that the Buyer about the short sale process. Short sales require patience. It may take 2-4 months to complete the transaction.
- Assist the Buyer in obtaining a mortgage pre-approval before submitting an offer. The borrower's lender is going to require proof of funds if it's a cash deal or a commitment letter if there is financing involved.
- Let the buyer know that an offer to close quickly with a substantial down payment is more attractive than one seeking 95% financing.
- Counsel the Buyer to expect to buy the home in it's "as is" condition. The seller doesn't have any money to make repairs and the lender is going to require an as-is offer.
- If you are inexperienced with Short Sales, let the listing agent know.
- The Seller's lender is primarily in control of the process as they are the decision maker.
- Be patient and counsel your Buyer to be patient. This cannot be emphasized enough.
- How long will a short sale take? Short sales can be very time consuming and require patience from everyone involved: seller, buyers, Realtor, and lender. Approval may take two days to two weeks to two months. Some short sales may take as long as 3-4 months from beginning to end.
- The Lender has the final say. Remember, the lender is the one who approves the short sale 100% of the time. If there is more than one lender, the Realtor will have to negotiate with each of them separately.
What Buyers need to know:
Buyers of short sale properties need to understand what they are getting into. Some buyer's believe that they are going to be able to "steal" a property and make a killing by reselling it. They have heard the stories that investors tell and think it's a piece of cake to buy a property fifty cents on the dollar.
While that may be the case in some instances it is not the norm and should not be expected. Remember, the lender wants to sell the property as close to market value as possible. In fact, most lenders have pretty rigid guidelines as to how far below market value they will sell for. Beyond that point, they will take the house back in foreclosure.
Again, if you have any questions, please give me a call. I look forward to working with you and to success.
Sincerely,
Frank Wible, Realtor
Loss Mitigation Supervisor
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