Buyer and Seller
Knowing more about Short Sales for both Seller's and Buyer's
Short Sale Mistake #1: Not Knowing The Sellers Options
It’s very common to find sellers who owe too much on their homes. It
is predicted that by this time next year up to 50% of all the homes for sale will be
owned by sellers who owe more on their homes that true market value.
Sellers often make the mistake of thinking their only option is letting the house go into
foreclosure. It’s important to understand that the banks don’t want to do foreclosures.
Banks are in the lending business not the home owning business. It is extremely
expensive for the lender to actually carry out a foreclosure.
Short sales are almost always the best option for both the lender and the seller. There
are some negative effects on the sellers credit from doing a short sale. Granted a
foreclosure is far worse than a short sale.
However, there is a little known technique that allows the sellers and the lender to sell
the home…while preventing the seller from having any negative credit history. This is
called a Work Out.
Here is how it works:
The seller owes $500,000 on a first mortgage and $30,000 on a second mortgage. The
market value on the home is $500,000. In order to sell the home in this market the
second mortgage holder will have to agree to take a total loss and lose $30,000.
When that happens there could be legal and credit related issues that the seller will
be stuck with.
But, if the seller would agree to pay all or part of the $30,000 back to the second
mortgage lender as an unsecured line of credit. In exchange for the seller agreeing to
pay all or part of the debt back—no negative credit will be reported and no legal
issues will arise.
Short Sale Mistake #2: Not Understanding The Process…
Here is the bottom line. Short sales do take time. It is certainly possible to close a
short sale in 30 to 60 days, however, it’s not unusual for a short sale to take up to 90
to 250 days to close.
You have to manage the seller’s expectations and the other agent’s, not to mention
the expectations of the buyers.
Lenders are not efficient at processing short sales. Each lender has slightly different
ways of doing things.
By learning the actual process of doing short sales you can be in the driver’s seat.
Short Sale Mistake #3: Not Submitting “The Package” Correctly…
Every lender will require that there is a completed ‘Package’ submitted before they
will even glance at a short sale offer. Don’t submit anything to the lender until you
have all the paperwork correctly completed. I repeat, if you turn an incomplete ?
Package’ into the lender they won’t process it. They probably won’t even call you back.
A partial list of what “The Package” must contain;
1. A completed purchase contract.
2. Estimate net sheet.
3. Complete financial disclosures from the seller.
4. A hardship letter stating why the seller can’t make their payments.
Short Sale Mistake #4: Not Understanding The BPO…
The BPO is possibly the most important part of the short sale process. The BPO is the
lenders way of determining if your offer is fair for them. Here is the rub. Often times
the BPOs come in too high. When that happens your short sale offer to the lender will
We will try to control the BPO with the bank.
Here’s how. One of our representatives will meet the agent who is doing the BPO at
We will show our BPO to their agent and show why the home is worth what your offer
states it’s worth. The most effective way to do this is to do an actual BPO for the
agent. We will give them our BPO. Assuming the BPO clearly states the case why the
home is worth what we say it is, the BPO agent will use our BPO vs. doing his or her
own. This means our short sale offer to the lender will flow through the acceptance
process much more smoothly.
Short Sale Mistake #5: Giving Up Too Easily…
Realtors give up on short sales way too easily.
Because the process is different compared to a normal transaction its common that
agents will give up even trying to do short sales.
That is a huge mistake.
Short sales follow a process that isn’t that different than a normal sale. You don’t need
the ’secret decoder ring’ to do short sales. It’s simply a process.
Learning that process does take time and education.
The simple fact is that agents who have learned this process are going to be light
years ahead of the agents who have not. In this market active agents come across
sellers who need to do short sales every day. We at SolivitaSales are experts and
have handled many short sales and understand the our ever changing market.