Short Sale Success Factors
LK Team at the Chula Vista PSAR Home Fair!
There are a number of factors that play a role in the likelihood of the success of your short sale.
1. Can you show a financial hardship to the lender(s)? See "What is a Short Sale" page on this web site?
2. Nice house in a nice neighborhood.
It is easiest to keep buyers engaged in the process if they are emotionally tied to a property. Nice houses in nice neighborhoods increase the lieklihood of not losing a buyer along the way. That is not to say we can't complete a short sale on a modest condo not in the best part of town. It may just take a little longer to get the right buyer and/or get a new buyer if the first one walks.
3. Process starts around the same time payments are stopped.
Most short sale clients are no longer making their mortgage payments. The earlier in the process a client contacts us for help, the better. When homeowners wait until the Notice of Default occurs, or even worse when the receive a Notice of Trustee Sale, it can negatively impact our ability to get the sale approved and closed.
4. One purchase money loan or 2 loans with the same bank
One loan with one bank is the simplest in terms of short sales as only one must approve the sale. If there are 2 loans, a first and a second with the same lender it is good. In this case the negotiator handling the first loan can often handle both. Bank of America, CitiMortgage/Citibank are examples where one negotiator will handle both loans. Chase will be following suit. Wells Fargo/Wells Fargo Home Equity is not currently following this model and requires the realtor/negotiator to work separately with the 2 companies.
When a realtor must negotiate with two or more different banks it can be challenging to get everyone on the same timeline and difficult to get the two banks to agree on the payout to the second lender.
5. Second loans; two different lenders
Large second loans of approximately $100K or more can be challenging. The first lenders typically want to pay the second lender $3000 or possibly up to 10% of the amount owed to release their line. The second lienholders are typically unwilling to release the homeowner for hundreds of thousands of dollars with no liability. In these cases, the second lienholder may want the homeowner to "chip in" some cash at closing or to sign a promissory note in order to close the short sale transaction. The second lender may accept the amount offered by the first lender, release their lien and allow the short sale to close but reserve their right to pursue the borrower for the deficiency.
6. Local bank
Small, local lenders can be very easy to deal with because we can usually get a single point of contact early on who will handle the file personally. However, credit unions area somewhat notorious for being difficult negotiators in terms of forgiving debt.
7. Keeping current on HOA, if any
Banks are refusing to pay late HOA dues for homeowners. We can sometimes settle old HOA debts and negotiate some relief, but the homeowner will most likely have to have the funds to settle the debt.
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