Short Sale CASE STUDY: 022

Funded and Recorded

It is my please to announce that this short sale has come to a successful close.

The buyer wired his money to escrow and they were able to pay off the existing mortgage per the terms of the short sale approval letter and the home has now been recorded in the new owners name with the county.

I am going to use this post as a summary of sorts to reflect back on the milestones, challenges, and the overall short sale process.

Most short sales follow the same outline and its important to point out
what those are as a way tomeasure how the file is progressing.

Important Facts:

-Home was listed on 10/8. First offer in on 10/10. 2 days on market.

-Existing Loan was FHA so we needed Approval to Participate in a short sale from HUD.  Approval to Participate was issued 1/17.  97 days.

-1st buyer backs out and we get 2 more offers. The best one being signed on 3/3.

-Approval of 3rd offer issued on 3/22. 19 days later.

-File closes 4/19. A total of 6 months and 11 days after I started working on it.

Important Milestones:

Paperwork should ALWAYS be started from day 1.  Offer or not.  Talk to the bank. Tell them what you are doing and partner with them up front.  They can get a pre-approved list price before you get an offer.

With this file, we got an offer right away so I wasn’t able to get any prep work done.  This wasn’t the cause for the first buyer to back out, but it can be. The fact that this was an existing FHA loan added an extra layer of paperwork and delays.

Once the bank knows that you want to do a short sale, they need to send a third-party appraiser or agent out to provide a price opinion or appraisal on the home.  This ultimately tells the bank what the Fair Market Value is of the home and determines the price they will accept when you get an offer. For this file, it took 97 days for them to process the sellers paperwork, determine a Fair Market price and review the offer to determine if it met their expected net proceeds.  It wasn’t until after they reviewed the sellers information and got the price that they even looked at the offer we had received. (about 70 days)

Some of the delays during that 70 days were caused by not knowing up front that the existing loan was FHA.  I mentioned the specific FHA short sale requirements earlier.

Obviously, losing our first buyer was a setback or this file would have been closed in about 4 months start to finish. Offer #2 came and went within a few days but it was nice to have a cash buyer come through in the end.

Other than taking a little longer than I wanted, this file was a pretty average look into the short sales that we process.

  • No prep work done before offer received (I wish this weren’t the case, but these get brought to us most of the time with an offer in place or one arrives quickly because we are currently in a low inventory market)
  • 1st buyer didn’t end up buying (most of the time this is because of the length of time it takes for approval. Imagine if I could get this pre-approved before an offer came in!)
  • 2nd lien on property (usually its a 2nd mortgage, but the process was basically the same for getting it settled)
We are currently recommending earnest money and inspections be handled up front so that the buyer has a reason to stick around for approval. This causes them to stop looking for other homes after they have a few thousand bucks tied up in escrow.
I hope you enjoyed this inside look into the short sale process. I will continue to blog about the daily grind that is short sale negotiations.  If you haven’t already, you can sign up for updates on the right hand side of the website.  If you need help with your short sales, feel free to contact us.

 

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