Realtors and the Short Sale Process

This is a post but could also be considered a vent. I am frustrated with buyer's agents who thinks that short sales are like foreclosures. This is being written by a real estate broker with more than 7 years experience on short sales before short sales became normal

First, the bank does not make the decision on the signed executed contract. The transaction is between the seller and the buyer and not the buyer and the bank like a foreclosure. In a foreclosure situation the transaction is between the buyer and the bank.

Second, we do not present contracts to the bank. When the bank receives the executed contract it is just that it is executed and cannot be released until the seller and the buyer have agreed and have issued a Termination and Release.

The bank requires the executed contract for the purpose of calculating net proceeds and whether or not the the net proceeds falls within the investor/bank guidelines of short selling a mortgage. The bank is shorting the mortgage not the property. Short Sale an expression of how a house is being sold not what the bank is doing.

The bank's decision is to allow the homeowner/borrower to be released from any further liability to the signed mortgage contract when they purchased the property.

So when a contract is turned in a Preliminary HUD-1 is also turned into the bank. The bank then orders a Broker's Price Opinion (BPO)or in the case of an FHA the bank orders an actual appraisal of the property. Then the bank determines if there is mortgage insurance on the property. If there is mortgage insurance on the property then after the bank puts all their calculations in they will forward to the mortgage insurance holder on the mortgage. It then sometimes still needs to get a final approval from Fannie Mae or Freddie Mac.

Please also note that mortgages although may not have mortgage insurance that was paid along with the mortgage by the homeowner but banks take out insurance on mortgages for their own protection. If this is the case then the mortgage holder has it's own calculations and they do their own approvals on what is an acceptable amount to accept.

My experience has been if there is insurance that was taken out by the bank or if there is homeowner paid insurance the bank's only interest is to obtain the minimum necessary to collect on the other part which is insured.

There is much dis-information on this process and as a listing agent it is frustrating when I have buyer's agents arguing with me on how this process works.

If you are new at this process listen to experience and don't argue. Ask questions especially to your homeowner. There is nothing more frustrating than starting a short sale to discover that the homeowner has additional liens on the property like IRS liens or State Income Tax liens. These liens and other liens WILL NOT BE PAID BY THE BANK under any circumstance.

The banks are overwhelmed they will show you little patience. Banks work the fires first so you must be prepared when you actually get a person on the phone. If you the realtor are unfamiliar and not sure refer the deal to a fellow realtor who can complete the transaction you will get the referral fee with no work :)

For more information or if you are considering a short sale please visit me at my website www.TheNeighborhoodAgent.com or call me at 202-344-0045