How Does It Work?
Provided you qualify, the first thing you’ll want to understand is that a short sale is nearly identical to a standard real estate transaction with one exception…your lender(s) must agree to accept less for the home on the sale date than you owe. This is called the Short Sale Contingency.
The first step: List your property for sale based on a short sale pricing formula and bring a buyer to the table.
The second step: Present the offer to the lender according to their policies and procedures. It’s important that you let your competent professional handle communications with the bank to ensure a streamlined process.
The third step: Your lender will send someone to your home to evaluate it much like we do when we list your property. They will report their findings to the lender as a baseline for negotiation.
The fourth step: Negotiation. This is where we fight for the right price and work the transaction numbers to be favorable for all.
The fifth step: Short Sale Approval. When your lender issues what’s known as a “Letter of Agreement” to sell for less than you owe, you will have an opportunity to have this letter reviewed by a competent attorney to ensure that it is in your best interest to proceed.
The sixth step: Agree to the terms and provide notice of short sale agreement to the buyer. This is the point at which the Short Sale Contingency has been met and the transaction enters a normal real estate sale timeline.
Due Diligence begins at midnight on the day that we deliver notice of a short sale agreement between you and your lender. Due diligence is the time period specified in the purchase contract that allows the buyer time to inspect all material facts about the property.
The seventh step: Close the sale and fund. At close of escrow, all of the proceeds from the sale are wired to your lender(s) and the short sale agreements are executed.
Step 3: What does it cost?
Facts about Short Sales:
- Your lender is not a party to the transaction.
- Every lender has its own set of rules and procedures that they follow which directly affect the time that it takes to receive a response.
- Only one offer is submitted to your lender at any given time.
- Short sales are a form of debt forgiveness. Debt forgiveness can be considered taxable income, but not always.
- Short sales leave a deficiency on the table. If a lender agrees to take less than you owe, there’s a balance outstanding. Something has to happen to that balance. A proper short sale agreement will eliminate this liability completely.
- Every short sale is different and a unique challenge, but the challenges are similar.