Every short sale is evaluated on the Hardship that the Seller is experiencing. A Hardship generally falls under the following categories:
- Reduced income (furloughs, new job, partner’s loss of job, pay cut)
- Illness or medical emergency
- Job transfer (voluntary or involuntary)
- Divorce, separation or marital difficulties
- Exotic mortgage terms (an adjustable-rate loan)
- Military service
- Death in the family
- Involuntary increased expenses and excessive debt
While in some cases, a short sale can be reviewed for approval prior to an offer, most Lenders will require a signed Purchase contract and completed Lender forms to begin the application. Lenders may review the file under different conditions if based on whether the loan is current or past due.
Lenders generally have specific guidelines to follow when a Seller applies for a Short Sale. Some are government required while others are Investor required. An Investor is who actually owns your loan. The Lender’s role is to make sure 1) All the documents required to properly review a short sale for an approval is received and completed as required. Anytime that documents are submitted, they are evaluated on completeness. Any delays or an incomplete package can add more time to the review. Typically, a Short Sale package can be over 100 pages of documents if all documents are submitted in their entirety.
The Lenders will determine the Seller’s financial ability to pay. This step will take into account the document expenses and income along with the hardship that is written on a Hardship letter. The main review in this stage is to determine if the Seller’s issues warrants a short sale OR is the Seller capable of continuing to pay for the loan IF the hardships listed above is not clearly the issue.
The Lender will request a valuation from a local agent. The agent will perform a value check and report back to the Lender their determination. In some cases, the valuation is not accurate or does not take an accurate picture of the home (example: home has a significant amount of repairs) or may not take current market concerns into account. Should this come up, then it is the role of the Real Estate agent (ME) to fight for the corrections and ensure we have an accurate valuation.
Once the Lender makes their determination that all documents are in place, the value is returned and they’ve checked off all the applicable requirements the file will be sent to the Investor for a review for an approval, denial or counter.
A Lender can come back with a decision that may not contain an approval. When this happens it is extremely important for my client and I to understand what may have caused the non-approval, demand where applicable a re-review or if this is based on the offer amount by the Buyer seek Buyer’s response to increase the price.
Obtaining a Short Sale is not simple, but it is not unachievable. I’ve been extremely lucky to have the majority of my short sales approved and closed. The reason for the success is knowing what the Lender needs before the Lender receives the package, evaluating the Hardship beforehand so I can advocate my Seller’s situation if an issue comes up and most importantly understanding how the process works in order to push for the resolution quickly.
Persistence, diligence and resolve are the key characteristics of a Skilled and Experienced Short Sale Agent.