How Does A Short Sale Work?

Many people might be wondering “How does a short sale work?”  While there are countless variables, the one thing that is for sure is that banks are rarely interested in foreclosing.  A bank would much rather work out a strategy with a homeowner that is having difficulty, than risk a foreclosure on a property.

So, how does a short sale work?  What you need to do first is find a knowledgeable person to work with you.  There is no real benefit for you, the homeowner, to go through this alone and that is why you should invest in the help of a Realtor.   Despite the fact that you have hired a broker, you want to ensure that this person has familiarity with short sales because over two thirds of short sales are unsuccessful.

Once you have found a Realtor experienced in short sales you’re going to want to get a contract offer on your home to get things started.   A bank will not be willing to look at your short sale without having an offer on your property first.  This is merely the start on  figuring out “How does  a short sale work?”

As soon as you have a signed offer and a HUD1 then you can fill out your file, which will include pay stubs, bank statements, the previous year’s taxes along with a letter of hardship.   The file should be sent in its entirety.  You want to follow up within 24hrs to be certain that it was received and then write down the name of the person you spoke with along with asking them to make a note in the account.  Once the bank has received all of the necessarypaperwork it is now time to start negotiating which could take 30-60 days, generally speaking.

If the contract offer and amount owed are extremely different an appraiser or BPO (Brokers Price Opinion) may be asked for an opinion.  When those numbers come in, as long as they are within roughly 10% of each other, things will proceed.  If they vary more than that the negotiating process will start all over.

Many Realtors confuse a short sale for a normal residential sale, and while similar, the difference is the Realtor is now negotiating with the bank and not a homeowner.  Today’s industry average for Realtors getting short sales approved and closed is about 1 in 3, which is why finding an experienced Realtor comes in handy.