Lesson#6 - What are all the Steps to the Short Sale Process?
The short sale process has been misunderstood by many industry professionals and I am here to reveal the real story. The short sale process begins only when offer is submitted to the lender. Without an offer from a buyer, lenders will not even begin the short sale process.
Once a lender has an offer in hand, they typically request financial information from the borrower. Most assume that this request for financial information is used by a lender to prove that the borrower has a financial hardship. That is true, however, the main reason a lender requests this information is so that they can determine what assets the borrower has (to which they can go after to off set their losses). There is nothing innocent about a lender’s request of this financial information; they are looking to take whatever they can get their hands on.
Once the lender has the offer from the buyer and the financial information from the borrower, the lender must then determine if the offer fits within their short sale approval formula and guidelines. In order to make this determination, they need to know the property’s value and marketability. They accomplish this by either ordering a BPO (Broker’s Price Opinion) that is completed by a local real estate, an appraisal that is completed by a licensed appraiser or in some cases; lenders may order both a BPO and an appraisal. This is a practice that Countrywide often employs.
Once the lender has their property value and marketability data in hand, the short sale process is just about over. The last step is done behind the scenes. Since most lenders don’t actually own the loans they service, they actually have to submit all this information to the loan owner for final approval. Within a few days, the loan owner responds with the lowest number they will approve. And with the loan owner’s OK, the lender can send the approval letter to the prospective buyer.
In the event the offer is too low, most lenders will counteroffer at the property value amount. This has been the source of tremendous confusion. Most buyers think lenders will take a discount in a short sale situation. “So why does the lender counteroffer at the appraised value?” is what most buyers ask who are not trained on negotiating with short sales. That’s where it pays drastically to be working with a short sale expert. They know how much the lender will approve based on the BPO/appraisal value the lender determined. I recommend working with one of my students since they know this side of the transaction inside and out. And that is the real story revealed of the short sale process.
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2 Responses to “Lesson#6 - What are all the Steps to the Short Sale Process?”Comments
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I have a difficult decision to make with many variables and need some advice.
A property lists as $135,900. for an oceanfront condo. The building is 5 years old. My broker contacted the manager of the building and was told that 30-40% of the dwellers in this building are in some form of arrears, The condo association has placed several assessments to cover the cost of unoccupied condos.This is a short sale, the condo was orinigally purchased at $340,000.
The seller has not paid his fees for over a year.He wants a short sale to be paid in CASH.
How do I verify the accuracy of all this?
If no bank will underwrite any mortgages in this building should I just walk away or negotiate a very low offering. My cash holdings are from several banks.The seller wants a letter from a bank to verify that I indeed have the cash to purchase the condo.
I have a home equity loan for $188,000, $58,000 in my personal account and $22,000 in cash in the form of bank money orders saved over the past three years.
What cash offer should I make? Is $100,000 too low?
Am I entering into a situation where I will be be paying very high assessment raises?
Hope you can help
Jack Levi DDS
Are you one of my students? If not, once you enroll in our program, we’ll show you exactly how to approach this deal.