I realize that lenders are under increased pressure to avoid foreclosure but
there are limits to what they will do. And - Investors understand the short
sale process is more complicated and the response time is much longer.
However, in recent months - I have had several buyers offer full price on
Sale' listings only to find out weeks later that the lender never even
taking a discount or that the sales price, commission fees, etc... are
impossible. Since there has been little need for Short Sales in the past 5
many Realtors are understandably inexperienced with the procedure.
To add to the confusion, this process has no set guidelines or guarantees.
But a combined effort by seller and agent to find out as much as possible
the lender's requirements, who to submit the offer to, an estimated wait
time, etc... may help us get more sales to completion. (and get impossible
listings removed from the MLS) I assume every sale and lender will have
differences but here are some common things we have noted:
Don't rely on a loan rep's verbal statements - ask (in writing) for them to
put their response in writing. This can help cut down on vague stall
like "just start sending offers - then we will respond."
Keep in mind, the Private Mortgage Insurer (PMI) is an ally since they don't
have to pay unless the property forecloses. On the other hand - the lender
usually won't take a short sale that is substantially below what they would
from auction and PMI.
If there is more than one mortgage - ALL lien holders need to agree to the
The lender won't say how low they will go - but you may be able to search
online or drill your preferred loan processors to get a ballpark idea of
maximum discount a specific lender is accepting.
Most lenders require a short sale "package" This usually includes:
Homeowner to prove they do not have the means to repay the mortgage.
The lender will ask for paystubs, bank statements, tax returns, employer
verification, and proof of hardship (if applicable) such as pinkslip,
proceedings, doctor or hospital receipts, proof the seller must move to
Proof that the sellers change in ability to pay is the result of something
new - not something the seller concealed from the lender when they
applied for the loan. (concealing could be considered mortgage fraud)
An appraisal or CMA to verify the value of the property has decreased, the
offer price is the maximum price obtainable and the property listing has
exceeded average days on market.
Verification that the seller has met with a HUD approved counselor and that
other options (refinance, loan modifications, etc...) would be fruitless.
Proof of repairs needed with qualified estimates for repair costs.
Preliminary HUD-1 with all estimated costs including required restrictions
Realtor commission and title agency fees paid from the sale.
There may be special requirements for submitting offers to the lender and a
few lenders require specific clauses or disclosures be included with the
If the seller's request is accepted - the lender will give a conditional
approval to allow a short sale. This 'approval' doesn't usually agree to a
- it just confirms the lender will consider lower than mortgage balance
HUD has (free) Housing counselors to help the homeowner understand the law,
refi or sale options, and organize the qualification process. Best of all -
these counselors will also assist you in negotiations with the lender. The
sale process will almost always go smoother (and much quicker) by enlisting
their help. You can find contact information for HUD approved counselors
located near the seller at:
or call 800-569-4287.
Finally, make sure the seller knows upfront that they will probably owe the
IRS on the amount of any forgiven debt or the lender may require them to
for a new loan to pay back the shortfall. Prepare for the possibility that
even if the lender approves the sale without a loan payback - the lender may
up with last hour requirements to pressure the seller into a loan, the
buyers into paying more cash or the Realtors to forego or reduce their
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The source of the listing data is as follows:
My Florida Regional MLS (updated 3/18/18)