Short Sale Tip #1
Like a loan modification, a hardship must be taking place in order for your lender or servicer to grant or accept a short sale. It's important to remember a lender "usually" will not even discuss a short sale until the homeowner has fallen behind on payments right around 90 days. The lender must be convinced taking a smaller loss now is better than a bigger loss later. To make that case, start with a letter written by the seller giving an overview of the seller's desperate situation.
The lender must recognize the seller's inability to pay the loan, immediately and in the future, and that the situation is irreversible. The seller should supply as much evidence and documentation as possible, such as divorce papers, evidence of job loss, delinquent accounts, utility shutoff notices, car repossession paperwork, last two years tax returns, recent pay stubs and recent bank statements. If the lender thinks the seller has money or assets stashed away, it will never go along with a short sale.
You can view example hardship letters here.
Short sale Tip #2
Buyers must be organized and present a clean offer, make sure that you have your financial statement or lender letter ready to submit with the offer. Also be prepared to buy a property that is being sold as is without any credits for repairs or fix-up. The bank or lender won't approve the Short Sale if it is too far below the market value of the house and they will do their own BPO (Broker Price Opinion) and/or appraisal before accepting or countering an offer. Remember that a bank may not accept even a full-price offer because they don't educate the seller on how to price the property or what it is that they are looking to net.
Since Short sale properties are most likely being sold as is, the buyers should make the offer contingent on the findings of a home inspection. Sellers are required to disclose material defects that they are aware of, but by this point the owners have stopped making their payments and have no incentive to do anything to the house because they'll make nothing on the sale.
Short Sale Tip #3
The Success of The Short Sale Lies With a Great Real Estate Agent
Some real estate agents are well versed in and only work with Short Sales. They learn the ins and out of working with the lenders loss mitigation departments, and getting approval from them. The process is similar with every transaction, but each of the lenders have different reps behind the desks making decisions. Even more complicated is that each bank has different departments. For a Short Sale the two departments that you would be working with the most would be the legal department and the loss mitigation department for the short sale process and these two departments seemingly don't work in conjuction with each other.
From the sellers standpoint, you need a real estate agent who specializes in Short Sales to make sure you are as timely and effective as possible with the lender. Also you would need a real estate agent that is a very good negotiator and one that could guide you through the process with the documents required to submit to the lender along with both the listing contract and the purchase contract.
From the buyers standpoint, you need an agent who specializes in Short Sales to guide you to the better deals and to make sense of the long process of acceptance. Also just as the seller needs an agent that is a very good negotiator, so would you. For buyers, short sale transactions can be a roller coaster ride. They need to have patience because the process is so long. Even when the homeowner and the buyer settle on a sales price, the lender still has to approve it and the process could take anywhere from 30-90 days, sometimes longer if there is a second lien holder involved.