Short Sales: Frequently Asked Questions (FAQ)

1) "What should I do if I cannot find the homeowner after listing the property?"

You will need the FULL cooperation of the homeowner(s) to successfully negotiate the closing. In the event the homeowner(s) is unavailable or uncooperative, you may want to consider releasing the listing. This should be at your discretion and your broker’s.


2) "Can the seller just sign a Deed in Lieu (DIL)?"

The requirements for a DIL are similar to the short sale requirements and need much of the same documentation.

• In general, the lender will not accept a DIL on an investment property
• The property must be listed at least 90 days with no offers
• Clear Title/No second lien hold or other liens
• Full financial package (same as the short sale package)
• Foreclosure sale date cannot be within 30 days or request


3) "How long does it take to get a short sale closed?"

The lenders have asked us to give them 3-4 weeks after submitting the offer with the short sale package to make contact. Once submitted, the lender will contact my team (Short Sale Connections) for access to the property. A member of my team will notify you when we receive this call. The BPO takes 2-3 weeks to be returned to the lender and reconciled. Once the BPO has been returned and reconciled, please allow another 2-3 weeks for the lender to review the offer.

The industry standard, at this time (Q1 2009), is 60-90 days total.


4) "How is the seller’s credit affected?"

Completion of a short sale may appear on the Sellers/Borrowers credit report as: Settled, paid, short sale, or offer and compromise.


5) "What is a short sale?"

A short sale is a real estate transaction in which the lender allows a property to be sold for less than the amount owned on a mortgage and takes a loss.


6) "What is the difference between a foreclosure and a short sale?"

The negative impact for a foreclosure on a credit report is greater than the impact of a short sale. If the homeowner lets the property be foreclosed on they can be subject to a deficiency judgment. Generally, if the short sale is approved, the lender will not pursue a deficiency, although my team cannot guarantee that the lender will not pursue a deficiency.


7) "What are the tax implications on a short sale or foreclosure?"

Both can be a taxable event. This topic is currently subject to new legislation and therefore the homeowner should consult their tax professional for the most current, accurate information.


8) "Why can’t I call the lenders directly?"

We have our own contacts with the lenders, and to have more than one contact person on a file can further delay the process. It can also greatly anger any representatives of the lenders as they don’t have the time to relay the same information to multiple individuals.


9) "Can I send in a “Low Ball Offer” and have the lender counter?"

Unrealistic offers will be rejected quickly. Even worse and more likely, due to the outstanding work load that the lenders have, the offer will be ignored since the lender will feel that the buyers are not serious buyers and the negotiator will not respond at all for weeks or months. The lenders do not have the time or the man power in this market for “fishing expeditions” from the buyers.


10) "Why does OHS request up to 48 hours to return calls or emails regarding status updates?"

Each of our negotiators has up to 350 files at any given time. We request that we are given this time so that we can meet the needs of all agents on all of the files that we work on.


11) "Why do short sales take so long?"

A short sale requires the lender to review the homeowner’s financials in order to determine if the homeowner has the ability to pay any or all of the debt, similar to a buyer qualifying for a loan in reverse. The lender must determine the value of the property and weigh that against the amount owed. They compare what they think they would net from a foreclosure sale to the net proceeds of a short sale. The amount paid to the lenders is not always the determining factor. Sometimes an uncooperative second lien holder will cause the senior lien holder to foreclose just to clear the title.


12) "Why do lenders foreclose?"

Lenders are corporations driven to make money. They must answer to their shareholders just like any other company. These corporations do not want to own property. The only reason they foreclose is to gain control of the property or asset and recover as much of the principal loan balance, accrued interest, late fees, penalties, taxes they paid on behalf of the homeowner, as well as court costs and attorney fees. In most states, the laws are written so that the lender can only recover these widely accepted losses.


13) "Why does Your Team (Short Sales Connections, or more specifically: Oregon Home Savers, LLC) charge a fee?"

This fee is to pay for the services of a full time staff of negotiators. The seller has agreed to use its services. Oregon Home Savers, LLC is not a real estate company and does not engage in any professional real estate activities, e.g., the marketing or sale of the property, and solely works with the seller’s lender(s) with respect to outstanding encumbrances against the property. This is a professional short sale company that has one of the highest closing ratios of short sales in the industry. It has excellent personal relationships with lenders, and a wealth of experience in this field. Agents around the country use the services of OHS to get deals done that they otherwise would not have accomplished on their own.


14) "How is this fee paid?"

The buyer pays this fee and it is identified on the purchase and sale agreement. In the past, agents have done it one of two ways: They have asked for $3,999.00 from the seller to cover the cost, or they have lowered their offer by that amount, understanding that their buyer will pay the fee. Under no circumstances will my team agree to share in any agents’ fees in lieu of the Consultant Fee.


15) "How should I write that into the Earnest Money Agreement?"

If you are asking for the seller to pay the fee, on Page 1, Line 39, after describing the loan or payment option, include “Seller to pay $3999.00 in buyer’s closing costs.” And, in every case, on Page 2, Line 55, under Additional Provisions, include “Buyer to pay $3,999.00 to Oregon Home Saver, LLC.” If your buyers are obtaining an FHA loan please contact my team to discuss how the fee will be paid.


16) "If we do not close the transaction on this property, will my buyer be charged the fee?"

Absolutely not.


17) "How long will it take to obtain lender approval?"

This varies greatly according to each specific case. Each seller’s financial situation is different, and some are more complicated than others. A general estimate from the time you submit your offer would be 30-90 days to receive a response, either acceptance or counter, from the lenders. If your offer is not accepted by the lender, they generally do not provide a written response. Make sure your buyer understands this timeline so that everyone has reasonable expectations.


18) "Can more than one offer be submitted to the lenders?"

Frequently, multiple offers will be obtained on a short sale. Listings are kept Active in RMLS until there is written lender acceptance of an offer. Lenders will not provide a written rejection to your offer, only a verbal rejection. A written response is provided only in the case that your offer has been accepted.


19) "What are the steps in negotiating the short sale?"

It's illustrated here.

An offer is presented to the lender, and generally in the next 2-4 weeks a loss mitigation representative is assigned to the file. A BPO (Broker’s Price Opinion) is ordered by the rep. Once the BPO is completed, it normally takes 14-21 days for that to appear in the lender’s system.

If there is more than one lender, there may be more than one BPO, and sometimes more than one per lender. Once the loss mitigation rep has reviewed the completed file and done his/her’s due diligence, the lender will make a decision on that offer. This process needs to take place at each lender in order for them to make a final decision.


20) "There is an auction date next week, is the property being foreclosed on? What’s happening to our offer?"

Most short sales have auction dates, and if in the middle of negotiating the short sale, the auction date arrives, my team will make every attempt to postpone the auction while negotiations continue. Most lenders wait until the last minute to postpone auction dates, and this is very normal and typical. However, there is no guarantee that a lender will postpone the foreclosure sale, and my team does not warrant that a foreclosure sale will be postponed.

Whew!


Nick