Given the volume of short sales and default resolution cases that we help buyers and sellers complete, we hear a great deal of frustration expressed by all concerned. The sellers have legitimate concerns about deficiencies, buyers have concerns about waiting around for what seems like an eternity, Realtors® wonder if they will ever earn their commission, and some of the lenders feel overwhelmed with the number of requests to approve short sales. It seems to me that a lot of the frustration stems from false expectations, a great deal of misunderstanding, inconsistent information on the web, overgeneralization, desire for discernable logic to play some role on the part of the lenders, and the hope for a “great deal” in a short time frame. The good news is that there many great deals out there. The question is “how do I find the best deal?”
We have all heard of the win/win scenario, and it is the goal of any successful negotiation. In a win/win scenario, both parties to a transaction perceive a “win”. In other words, both parties come out ahead of where they realize they could have come out. How we define the “win” can and will be different in almost every situation. In a short sale, there is the possibility to create a win/win/win – so long as everyone knows what to expect, is willing to be patient, has good advice, and understands who the players are and what is at stake for each. When you understand the various parties, steps, inconsistency, and know what you have to gain by comprehensive knowledge, I think you will agree that short sales hold a ton of potential.
What to expect: It will likely take about 90 days to know if an offer is going to be approved by a lender. There are lots of exceptions to this, for example, FHA lenders provide an “authorization to participate” (ATP) and the ATP gives the minimum net a lender will take. Some lenders will provide a gross and/or net amount they will accept through the Making Homes Affordable program (HAFA – which stands for Home Affordable Foreclosures Alternative). Know that there are a number of short sale programs for which sellers can qualify. Each program and each lender implementing those programs have different requirements, consequences and processing times.
A note on being patient: make sure your broker and/or lawyer from whom you are taking advice has done more than a few short sales. We have now processed a few hundred, and I can assure you that no two short sales are the same.
The next question to ask yourself: Is it worth it? Should you submit an offer on a short sale at all? If so, why? To read some discussion on these questions, visit The Great Short Sale Debate: Is it worth it?