Successful short sales require complex issues that must be resolved by all parties involved. It is important that sellers and buyers have their expectations properly set. I thought I would relay some short sale realities that should be considered…and here they are:
1) The wide array of parties, parameters and processes involved in a short sale make it a complex and highly specialized type of real estate transaction.
2) Traditional short sales have a high failure rate. Transactions fail for a variety of reasons. If a short sale property is listed by an inexperienced or uneducated agent the transaction may be doomed from the beginning.
3) Seller MUST provide provide a “Hardship Letter” to the lender and financial evidence showing a legitimate hardship. “Hardship” is subject to interpretation by the lender or investor. Sellers must be prepared to work with their listing agent to submit a lengthy and detailed financial report to the lender. I have submitted short sale reports in excess 0f 120 pages!
4) A short sale does not stop the foreclosure process. Foreclosure proces continues to progress on a parallel timeline to the short sale.
5) Buyers and Sellers need to understand that in most cases, the lender is not the final decision maker of an offer that is submitted. Lenders are often just the “servicer”of the loan(s). A large percentage of loans are sold by the lender to an investor. On top of that, loans can have multiple investors and each investor can set different policies. When investors review an offer, they often change the conditions in order to approve the sale. There can be multiple decision makers that must approve the sale.
6) Buyers and Sellers should expect a minimum of 90-120 days to finalize a short sale.
7) A cash offer does not speed up a short sale transaction nor improve the strength of the offer. The only thing investors consider is their final net from the sale.. Remember, they are taking a loss, and the amount of that loss is their main concern.
8) It is the responsibility of the Seller to identify and obtain release from all other liens that are non-lender related. Such as, HOA or construction liens.
9) There may be significant tax consequence to the Seller after a short sale of their property has occurred, especially if it was an investment property. Sellers should always consult with their CPA (and real estate attorney) before putting their property on the market.
10) Short sale offers are compared with an independent assessment of the properties value. An appraiser or real estate broker is hired to provide a market analysis of the property. Investors have the right to reject the numbers reported to them and only approve a higher offer that meets their expectations, regardless of what market value is suggested.
11) Most importantly, the seller has to be completely committed to the process and be cooperative with all parties through the long process.
What questions do you have about short sales? Who do you know that can use our help? Need a name of a highly skilled real estate attorney or CPA? Please give us a call so we can help you or someone you may know. 503-495-5191
GORMAN-ROSS Real Estate Network
All my best,
Kevin Gorman www.ItsaMatterofTrust.com