The Short Sale Process
What Are the Banks Looking For?
When it comes to doing a short sale, there are specific things that the banks are looking for when they're considering a short sale. They have files piled to the ceilng right now, and they're all pending short sale review, negotiations, BPO's, etc. It's really up to you, as the investor, to present a spectacular package to the lender to mke the short sale process go as smoothly as possible.
Let's review some of the items that all banks/lenders require before considering a short sale.
The lender will usually (not in all cases, though) require that the home owner be at least 3 months behind on their mortgage payments. Recently, however, I'm hearing more storeis of lenders that are considering a short sale without the payments being delinquent. This is due to the fact that the borrowers are informing the banks ahead of time of their inability to pay the monthly payments, so the banks would rather go ahed and start the pricess before letting it get behind.
Also, the banks will want to see financial statements from the borrower. These will need to be a reflection of the borrower's current financial status, and will need to be updated with the lender every 60 days. So be prepared to get new financial statements filled out every 60 days by the homw owner. The financial statement will need to be supported with bank statements, tax returns, pay stubs, and any other additional proof of income.
The lenders will want to know the specific reason that the borrower is not able to pay the loan any more. They will ask that the homeowner write a letter explaining in detail their situation and what has changed recently to make them unable to make the payments on their mortgage. In the short sale process, this is referred to as the "hardship letter".
If there is a divorce pending, the lenders will want to see a copy of any legal documentation that you have supporting these facts, as it will play a big role in the decision.
The BPO (Broker's Price Opinion) is really what the deal hinges on. Once all of the paperwork has been received, the lender will request a BPO to be performed by a local Realtor. This is ordered by the loss mitigation agent that is assigned to the file, and they will choose whomever they want to give them the BPO. The BPO plays the biggest role in determining how much of a discount (short sale) that they lender will accept on the loan.
Once the BPO has been ordered and turned in, the negotiations between the bank and the buyer will begin. They will go back and forth severl times, and then a decision or a final price will be reached. If there is an approval on the amount that is being offered by the buyer, then the banks will issue an approval letter and allow a certain amount of time for the transaction to be closed at a title company or closing attorney.
How You Can Make The Short Sale Process Easy
If you are a real estate investor or a real estate agent, handling all of your short sales can be a daunting task. There are professionals who will handle the entire short sale process for you, taking the file from the time you have all of the paperwork signed by the seller (including the financial statments, etc), all the way to making sure that your closing goes smoothly.
If you plan to continue to do business and keep the balls rolling, then don't get hung up on the phones with these banks and lenders for 45 minutes at a time. That is NOT the best use of your time. You can beout talking to more sellers and helping more people out of the mess that they're in.
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