There are a number of critical steps through the short sale process. Once the first lien holder has reviewed all the documents, determined they have a complete package, and determined that the seller is eligible to participate in a short sale program, they will order a broker price opinion (BPO) or an appraisal (this is dependent on the requirements of particular lender, investor and/or mortgage insurance company who is in charge of making decisions) on the property. It can take up to 30 days to complete these initial tasks.
The value obtained by the lender is one of the lynchpins in a short sale transaction. Those who are processing short sales will be well served to work with the brokers or appraisers preparing the valuation. The value must support the contract or offer price. If the value comes in high, then you can expect a counterproposal from the lender or a rejection of the offer.
Once the value is in the lender’s system, they will determine whether the offer is sufficient, and there can sometimes be negotiations. This phase can go quickly so long as the value does not come in high. Once everyone agrees on the numbers, the lenders’ negotiators typically submit the short sale for upper management (or investor) approval. This last step before approval can take up to 30 days. Once you an approval, you typically have 30 days to close if you are obtaining a loan or, 14 days if you are paying cash. These timeframes can again vary from lender to lender, and from short sale program to short sale program. If we are processing under the Making Home’s Affordable program, so-called “HAFA” short sale, then we sometimes get a pre-approved value. Just be aware that there are different rules, requirements and processing times for various programs. One must understand the differences and be clear about what’s happening.