Aside from the normal list of problems that a home can encounter through the Escrow process, there are a few things that happen that are specific to Short Sales that can kill the deal. I’ve outlined 5 that I have come across and a little bit about each experience.
Failure to Provide Documentation
Your REALTOR®’s job is to help you sell your home before it forecloses. This means marketing it well, pricing it right, attracting an offer, then submitting the offer to the lender. The process for each lender is different, but similar. There is one consistent factor that will slow down a short sale every time and that is the failure of the Seller to provide their REALTOR® with the documentation that your lender requires in a timely fashion. Every day you wait to provide that information is another day closer to foreclosure. When your REALTOR® asks you for documentation, make sure you provide it as quickly as possible.
Bad Broker Price Opinion (BPO)
One of the first actions that the lender takes on your house is ordering a Broker Price Opinion on the property to get a bottom line number from which negotiations can be based. BPO agents are many, and as expected, when you’re dealing with a lender who doesn’t know the market, you’re also dealing with a lender who doesn’t know that the BPO agent they’ve hired to provide the price opinion may also not know that market. If the BPO comes in at a price that your REALTOR® knows is invalid, or off-base, it places more of a burden on them to provide substantial data to prove that the offer that you’ve received is a fair market value offer. If you can’t prove that, then the buyer will need to increase their price, or you’ll be looking for a new buyer, and that eats up valuable time.
Poor Pricing Strategy
Your REALTOR® should have a pretty firm grip on the market where your property is located. This will enable him or her to develop a pricing strategy within the given time frame to lead the market in aggressive yet fair market pricing in order to attract an offer as quickly as possible. You’re selling short, so price is of little or no concern to you, as you won’t be seeing any of the proceeds. Your goal is to get out of the house as soon as possible. Follow your REALTOR®’s advice on pricing and price adjustments, provided he or she knows what’s going on. If they don’t, move quickly to find someone who is qualified.
Slow Response Times
In a real estate transaction, there are literally a dozen people involved in the process. In a short sale transaction, there are even more people involved. In fact, the people at the bank are probably the most likely to delay the process, and that’s pretty much a guarantee. It’s important that you have someone on your side who is quick about getting the information that you were quick to provide to the lender. It’s also important that your REALTOR® have the experience to orchestrate most of the transaction, including being involved in the buyer’s side of the transaction. Buyer’s lenders are the second most liable party in the loss of time throughout the transaction. Some of these you’ll have no control over.
If you don’t have mortgage insurance on your note, it’s possible that the investor who purchased your note took out a policy without you knowing. This is perfectly fine for them, but once the loan servicing company (the company that you send your payment to) approves the information that they have received from you and your REALTOR®, it’s time for them to submit the file to the investor. If the investor took out a policy on his or her investment, then they will have to deal with the approval of the mortgage insurance company, and that can be difficult, but possible. Many times MI companies will ask you to sign a personal guarantee to pay back a portion of the deficiency (what you’ll still owe after selling) instead of releasing you completely. I work hard to make sure this does not happen. After all, you’re selling your home for less than it’s worth, and you’re doing so because you don’t have any money.
In a real estate transaction, there are literally hundreds of things that can stop everyone in their tracks. The five short sale obstacles that I’ve offered you here today are some of the most common hiccups I’ve experienced.