The Short Sale process in Idaho may appear to be daunting to troubled homeowners. It’s an ever changing sea of lender guidelines that even most Idaho real estate agents have yet to grasp. Often times an Idaho homeowner inquiring about the short sale process comes up with more questions than answers.
While the short sale process varies from lender to lender there is a basic flow to process that they all tend to follow. The subtle differences in how the short sale process is handled according to each lender should be left to an experienced short sale professional (They’re not all created equal and it is important to find an agent who understands the short sale process at both the lender and investor levels).
What are short sales...
A short sale is a real estate transaction in which the sale price of the home does not cover the balance owed on the property’s loan.
Most often the seller’s mortgage lender agrees to accept a short sale because selling the property at a loss costs less than foreclosing on the property.
Usually a short sale is a win-win, because it allows the seller to save their credit and the lender avoids the large costs involved in a foreclosure.
In Idaho, a seller experiencing financial hardship can request their lender accept a short sale if they owe more than the current market value of their home.
Reasons a lender will consider short sales...
- Job Loss or reduced income
- Divorce
- Medical emergency
- Relocation out of town to retain employment
- Death
Starting the Short Sale process
Once it has been determined that a short sale is the best option, the next step is to find a qualified agent to represent you. The lender will take you more seriously if you have hire a real estate professional to assist you with the short sale.
1. Marketing Idaho Short Sales
The process of marketing a short sale is just as important (if not more) as a traditional sale. The intent is to attract qualified buyers who are capable and willing to purchase the home.
At a minimum the property should be ACCURATELY entered into the MLS, a sign placed on the property with flyers, and a lockbox on the door. It should be easy for agents with interested buyers to gain access. If inventory levels are high, a home that is difficult to show will be passed over.
Condition is important. While a homeowner is not allowed to receive any proceeds in a short sale a well kept home will generate a higher sales price, increasing the likelihood of the lender accepting a short sale. In a market with high levels of inventory a home that shows well will stand out and be more desirable to potential buyers.
2. Receiving an offers on short sales:
A successfully marketed short sale home will generate and offer (or multiples). When that happens, a package will need to be submitted to the lender. While each lender is different, the short sale package usually contains the following items from the seller:
- Letter of authorization, allowing your agent speak to the lender.
- Financial worksheet
- Seller’s hardship letter
- 2 years of tax returns
- 2 most recent pay stubs
- Last 60 days of bank statements
While these items are not required to start the short sale process it’s a good idea to have them ready and waiting so the short sale package can be submitted to the lender immediately upon acceptance of a purchase and sale agreement.
Along with this package your agent should include:
- Listing Agreement
- Executed purchase and sale agreement
- HUD-1 or preliminary net sheet
- Buyer’s preappoval letter
The short sale process with the lender:
While the short sale process at the lender level can seem like anything but there is a basic progression they follow. This typically takes anywhere from 60-90 days to complete and can exceed that depending the number of liens that have to be negotiated.
Short sale steps at the lender level generally include:
- The short sale package is uploaded into the lenders system.
- The lender orders a valuation of the property typically a BPO (Brokers Price Opinion) or an appraisal.
- A negotiator is assigned to review the file and present it to the investor (some lenders use multiple negotiators at various stages of the review).
- If satisfactory the lender sends the file to the investor for approval.
- The underlying investor will approve, deny, or counter the short sale offer.
- Upon investor approval the lender issues a short sale approval letter.
The overall process of successfully completing a short sale requires setting proper expectations for both buyer and seller about what is required to move the file from contract to close. While some agents have an incredibly low success rate with short sales, an experienced short sale professional will have the system down to a science and be able to move to through process more quickly than an average agent. The most important step a troubled homeowner can take is to seek the help of a short sale professional.
