After we receive short sale approvals, when can we settle?
The settlement time-frame will be governed by a combination of MAR contract, short sale approvals, and ability of buyers and sellers.
Short sale lenders usually give 30-45 days from day approvals are issued to close. Some short sale negotiators, however, believe that 21 days should be enough for a buyer using conventional financing or cash.
It is essential for the buyer’s side to be prepared as much as possible to move forward once approvals are received. Home inspections and loan application must be completed well before short sale approvals are issued.
Are buyer substitutions allowed?
No. Substituting buyers during a short sale transaction is a sure way to derail it. Approval letters are often written in stone. Name of participants on the short sale approval letter must match those on the final HUD-1 statement. Any discrepancy, even a missing middle initial or misspelled name, may cause the transaction to unwind before or after closing.
Please make certain that the buyers whose names appear on the contract are pre-approved by the lender and are open and honest with their mortgage professional about any anticipated changes to their financial situation over the coming months.
Are electronic signatures accepted on a short sale offer?
Not as this time. Most of us have heard of instances in which a short sale lender was fine with e-signatures and there is also a strong push within the short sale community to move towards e-signatures. To date, however, most lenders do not allow them.
In order for your offer to be considered by the short sale seller and to avoid processing delays, please present your offer with wet signatures.
Are there any offers in on this short sale listing?
Oftentimes, the answer is YES. We do our best to price our short sale listings to the market to enhance interest from potential buyers and to decrease the overall short sale timeline for our short sale sellers.
We are able to reply quickly to emails from other agents about presence of offers. Please keep in mind, however, that by the time you sit down with a buyer to put together an offer on one of our listings, the answer that we provided you a day or two earlier, may be inaccurate.
We recommend that you check MLS for status of listing. If it’s Active, please do your best to expedite the offer creation process with your short sale buyers.
If we have multiple offers, the buyers will be asked for their best and final offer before all offers are presented to our short sale clients.
Can a buyer request closing help from seller in a short sale transaction?
Most lenders have guidelines that limit seller concession to 3% of purchase price. Some types of loans being shorted either prohibit or limit seller concession even further. This is usually the case with FHA short sales. FHA guidelines prohibit seller concession, UNLESS the new Buyer’s loan is FHA. In that case, the maximum seller concession is 1% of buyer’s loan amount, not purchase price.
In cases where investor guidelines allow seller concessions, grossing up your offer by an offsetting amount in seller concession may increase the attractiveness of the offer to the lender’s negotiator.
We usually have a good idea about the chances of getting seller’s help on a particular short sale file. Please email us before sitting down with your clients to draft an offer and we’ll be glad to provide you with the information.
If buyers are asking for closing help, please make sure that the loan office explicitly puts it in the approval letter at the time of the offer.
How do I submit an offer on one of your short sale listings?
Once you have the offer and all required addenda signed by your buyers. Please refer to the Agent remarks in the MLS listing or visit our offer submission page.
Please read our offer guidelines carefully before writing your offer. These are available on MRIS under View Documents section on the right.
How many contracts will be sent to the short sale lenders for review?
Regardless of how many offers are received on the short sale listing, only ONE ratified contract will be sent to the short sale lenders.
Please keep in mind that your short sale offer must first appeal to the sellers of the property. Once they select an offer and ratify it, it will be sent along with other documents to their lender(s).
How many days are required to obtain short sale approvals?
We aggressively work all short sale files to receive an approval as quickly as possible. However, the evaluation of the offer by the lender and short sale fascilitation take time. Much depends on how motivated the lender is to settle a deal by taking a loss. We request buyers submit offers with a minimum of 90 days for 3rd-party approval. This date is found on the MAR Short Sale Addendum.
Please make sure that your buyers understand that short sales take time and although there is a chance that an approval letter might be solicited within 30 days, that’s an outlier rather than the norm.
How many offers will be submitted to the short sale lender?
How much should my buyer offer on your short sale listing?
The key to remember is that we are shorting or discounting the current mortgage, not the Fair Market Value (FMV). While a Buyer can get a discount from the FMV, as the lender is a motivated seller, it is unrealistic to think that the lender will accept additional loss of, say, 10% or more of the FMV. Remember, the lender is already taking a heavy loss.
In listing our short sales, we develop a FMV listing price based on recent comps. But don’t take our word for it. Develop your own set of recent comps to justify your offer. Typically, the lender will accept sold comps that are:
- less than 90 days old
- within a tight geographical proximity to the subject property (i.e a few blocks for inner city, 1 mile for suburban, 5 miles for rural)
- within a 15%-20% variance on square footage
- similar age and construction.
Finally, remember that the offer will have a substantial impact on how the negotiations with the lender proceed. A ‘lowball’ offer, even if it is accepted by the seller, will likely increase the length of time that it takes to obtain an approval, lower the odds of success, and jeopardize the Realtor commission percentage paid by the Lender. In our opinion, it is better to provide a reasonable offer from the onset.
Is advertised list price on your short sale listing a lender-suggested price?
Please refer to Agent Remarks in MLS for this information. If the short sale lender performed a valuation on the property and has provided us with a list price suggestion, we will make it available to other agents.
There are, however, times when the suggested price may not be enough once the file goes for approval to the mortgage investor or mortgage insurer. Although it is a rare occurrence, it does happen.
Is this short sale listing still available?
Please refer to MLS and MLS only for this. If the property appears Active, it means that it is fully available and the seller has not accepted an offer. We recommend check MLS often and also right before meeting with your client to write an offer.
If you’re writing an offer in the next 24 hours, please send us an email at Offers@mdrealtyexperts.com, so that we can expect it.
What should be included in the buyers’ pre-approval letter?
- Full names of all borrowers
- Property address
- Loan amount
- Type of loan
- Amount of needed seller contribution towards buyers’ closing costs
- Statement that buyers’ credit, income, employment, and other financial information has been verified
Failure to include this information in the pre-approval letter will cause delays in processing buyers’ short sale offer.
What should the settlement date on Page 1 of MAR Contract read?
We request settlement date on the first page of the standardized contract to read “30 days after 3rd-party approval”. This simplifies any addendum or extension that could be required by only modifying the 3rd-party approval date.
When can I expect to hear from you regarding the submitted short sale offer?
Once you submit your offer via our website, you will receive an acknowledgement that we have it. We will then notify our clients by email, phone, or sms that we have an offer.
Our team will review the offer for completeness and will get back to you with any questions or amendments that may be needed. Once we have a complete offer from you, we will present it to the sellers within 24-48 business hours.
Please keep in mind that oftentimes our short sale sellers are out of state or are going through a rough period of their lives. Although all of our clients are committed to the short sale process, they may not be available at all hours of the day.
The buyers should have patience and allow 2-3 business days to get a response.
When should home inspections be performed?
All home inspections must be performed after contract acceptance and not after short sale approvals. This process is a win-win for both the short sale buyers and short sale sellers.
By doing the inspections after contract ratification, the short sale buyers gain in-depth knowledge about the property and its systems shortly after entering into contract with the sellers.
In the event that home inspections uncover serious issues with the property, the buyers have the opportunity under the AS-IS Addendum to rescind the contract or perhaps amend the offer to account for unforeseen repairs before the short sale lender reviews it.
Doing the home inspections after short sale approvals means wasting 2-3 months for the buyer and missing other opportunities and not being able to amend the offer since most short sale approvals are written in stone in terms of the figures.
When should the buyers’ lender start working on the file?
As soon as the contract is ratified.
Our team and our clients require that loan application needs to be submitted to the buyer’s lender immediately after contract ratification. The loan officer should gather all of the information including bank statements, tax returns, paystubs, from the buyers and submit it to the underwriter for preliminary review and approval.
This way, as soon as our team provides the short sale approvals, the loan officer can requested updated financials from the buyers and order the appraisal.
Who are the short sale lenders and how many mortgages are there?
Please refer to the Guidelines for Submitting a Short Sale offers available on MLS. We provide this information to other real estate professionals before an offer is submitted given the fact that this information will become available during the short sale process anyway.
Although some real estate agents may have “favorite” and “hated” lenders, we rarely have any issues with one lender or another. If our team has decided to list a short sale, it means that we’re comfortable with the mortgage alignment, regardless of who the short sale servicers are.
Why is an AS-IS Addendum Required?
In a short sale, we are dealing with financially distressed homeowners. They simply do not have the financial ability to make repairs.
Additionally, the seller’s lender, who has to approve the transaction, is not in the construction business and does not wish to oversee contractors and repair issues. They are expecting to make a decision on its current AS-IS FMV, not to guess on its after repair value (ARV).
Please note in financing addenda that have ‘Seller Repair’ clauses, these lines must be stricken or set to zero. This particularly applies to FHA and VA financing.
The AS-IS addendum to the MAR Contact allows for buyers to conduct inspections and, if they are not satisfied with the results, to declare the short sale contract null and void.
I am an experienced real estate agent, why should I read these FAQs?
Our short sale team’s goal is to assist our fellow agents in presenting a win-win short sale offer with a high probability of success. These best practices are based solely on how our team operates and not on how other short sale listing agents may or may not be conducting their business.
We know that most of local real estate agents have had at least a few encounters with short sales over the past few years. We also understand that results vary from agent to agent and that, in general, short sales carry with them a negative connotation. Our team’s goal is to make sure that this particular short sale is the best one in your real estate career thus far.
Although we cannot guarantee the results, our pledge to you is that, as the buyer’s agent, you will be kept in the loop on the progress of the short sale and we will provide you with regular updates. We know and understand that your clients are important to you and that they are looking to you for guidance, updates, and support. We will do everything possible to assist you in making your clients happy. Please feel free to share these FAQs with your clients as you begin preparing a great short sale offer and setting proper expectations for your buyers.
Why should I use seller selected title company as settlement agent in this short sale transaction?
In a short sale transaction, we must begin title-work the minute we list the property. As a protection to your Buyer, we have already conducted a title pull-down. This is done to ensure we have knowledge of all liens that require negotiation/settlement. Title agent has been working on the property long before the Buyer made any offer.
Once we have your Buyer’s offer ratified, we then immediately work with title agent again to produce the HUDs required for submission of the short sale package. Our title agents are already knowledgeable about the property and thus able to quickly return an accurate HUD to us.
It is imperative that the title agents understand that our loss mitigation team is the point of contact for ALL HUD/Lender issues. Unauthorized and unnecessary communication with the shorting lender(s) will create confusion and can cause last minute complications or possibly even kill the transaction.
Finally, our title agents are well trained and are meticulous at taking care of post-settlement details, critical to ensuring all terms of the approval letter are met so the deal does not unwind.
A list of title charges is provided with the disclosures for you and your buyers’ review. You will see that their charges are very competitive and we can assure you that their service is unparalleled.
Will the property remain on the market after an offer is accepted by the short sale seller?
Once the seller signs a buyer’s short sale offer, we will change the status in the Multiple List Service to Pending (Contingent – No Kick-Out). Our team may solicit back-up offers while making every attempt to secure short sale approvals for the current contract.
Please keep in mind that internet real estate portals such as Realtor. com, Trulia.com, etc may show the property as fully available. We do not have control over the status on these sites.
Why does my buyer have to get pre-approved by the seller’s preferred lender?
At an increasing rate, we have been receiving pre-qualification letters from various lenders stating that a buyer is in good shape to purchase a home. After the Short Sale lender grants approval, and it is time to close, the buyer’s lenders admit that they did not fully screen the buyer’s credentials and that the buyer is not qualified to purchase a home.
Short Sales are time sensitive transactions. Every day that passes puts our clients one day closer to foreclosure. Requiring the buyer be pre-approved by a reputable local lender protects both parties.
Does my buyer have to use the seller’s preferred lender?
No. The seller simply requires that the buyer obtain a pre-qualification letter from their pre-selected lender. If your buyer elects to use another lender please make sure that we have their contact information.
Are rent backs allowed?
No, they are prohibited by the Short Sale Lender.