Top mistakes to avoid to get your short sales approved and closed.

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Yes, these are the top mistakes to avoid in order to have your short sales approved and eventually closed as I experience them with my fellow agents who work with me on short sales.

~ Not submitting multiple offers.
My experience tells me that providing multiple offers to the lender has indeed helped to show that the agent is doing all he/she can do to get the home sold. The multiple offers will make the difference. However, the servicing lenders generally do not like them. There is a second benefit to it: if the selected buyer walks, there is another purchase contract that can carry the deal to close.

~ Not submitting a proposal.
Many short sale agents just send a complete short sale package. It is true that you must have complete documentation, but it is important to draft a full proposal, as well. Organizing your request to approve a short sale has often made the difference between success and failure with the agents.
Also, many agents still think that the servicing lender is the one who approves the short sale and that they can actually negotiate with that lender’s “negotiator”. However, most loan notes are actually owned by the SMI and either they, or an MI insurance carrier if they have paid off a claim, approve or reject the short sale.

~ Not communicating adequately with parties.
Buyers are patient to a limit. Same with Communicating cooperating agents. You may think about weekly updates to all parties, more often when things happen. You can put a password protected area in your website where buyers and all parties can review the updates. Buyers must be part of the process and be motivated to hang in there when approval takes a long time.

~ Hardship.
Not meeting the definition of “hardship”. Like a criminal case wherein each element of the criminal statute must be proved, in short sale cases the hardship letter and financial documents must prove each element necessary for a secondary market investor to render a finding of “hardship”, and approve the short sale. The hardship letter must contain certain elements, without which, the case will be rejected. Make sure to get it right in the first place because a second attempt will ruined the authenticity of the transaction.

~ The lender’s net.
That’s what will make a short sale go through or not at the end of the day. The most important reason that a short sale is not approved is not meeting the net to lender, calculating the minimum threshold percentage of the fair market value. In the past, secondary market investors utilized the short sale versus REO comparison analysis to approve or reject a short sale. However, almost all SMIs have changed over to the minimum threshold analysis. That analysis ignores the amount of the debt and focuses on proof of the current fair market value of the property. For different SMIs and even different products, there is a set minimum threshold percentage of the fair market value that must be received in order for the proposal to be approved. Many agents erroneously believe they are still using the old comparison analysis.

So, the bottom line is this:
If a proposal meets the definition of hardship and that hardship is supported by the financial documents, you do nothing to cause the servicing lender to tank the proposal, and the offer meets the net to lender minimum threshold percentage of the fair market value, the short sale will be approved and if a qualified buyer remains, the transaction will close.

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Comments (0) Jan 12 2010

Short sales document: Short payoff offer & proposal letter

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This is the short payoff offer I use when I need to present the offer and the short sale package to the lender.
You can copy/paste it and use it as you wish.

SHORT PAYOFF OFFER & PROPOSAL LETTER

Date: November 18, 2009
To: Amy Butler – Loss Mitigation Representative
Lender: Acme Bank
Loan Number: 011-12-1234
Borrower Name: John F. Doe
Property Address: 123 Main St. Miami, FL 33141
Auction Date: 1/ 12/2010

*** NET AMOUNT OF SHORT SALE OFFER TO ACME BANK $168,000.00 ***

Dear Ms. Butler:

We are submitting for your review and subsequent approval, this comprehensive SHORT SALE
SUMMARY PACKAGE pursuant to our recent telephone conversation regarding the possibility of a discounted payoff on the aforementioned defaulted mortgage loan.

We are working very closely with your Borrower to facilitate a sale of the above referenced property. We have in fact entered into a purchase and sale contract (attached). I represent the Buyer and my clients are seeking to buy the property without the need for a mortgage contingency and subject only to your approval of this short sale proposal. Inspections have been completed. This sale requires and is only contingent upon your approval of the short sale offer subsequent to your approval of our request for a discounted payoff, we can close very quickly. We guarantee a cash based closing of the transaction within 5-10 days of acceptance of our offer.

We have been given complete authorization by the Borrower to discuss the mortgage loan that is presently in default that you are seeking to foreclose. We have again included a signed Letter of Authorization executed by the Borrower, which has been previously faxed to you.
Our contract offer to the Seller, Mr. John F. Doe, is $181,000.00 which will net your bank $168,000.00 after all closing costs and expenses which you can see on the Estimated HUD Statement attached hereto.

We understand that in order for our offer to be accepted that there may be additional due diligence which may need to be completed. Should a second Broker’s Price Opinion (BPO) be necessary, or if one has never been completed, we urge you to have one completed and as we have control of the property we would like to meet with your representative to ensure a proper assessment of the scope of repairs of the subject property and a true and accurate appraisal of the estimated “AS-IS” value of the subject property.
In order to obtain the most accurate valuation, it is our belief that it is imperative that the interior of the house be viewed and that the BPO not be limited to a cursory drive-by viewing or desktop appraisal or automated valuation.

Loan Number: 011-12-1234
Borrower Name: John F. Doe
Property Address: 123 Main St.
Miami, FL 33141
Auction Date: 1/12/2010

We can provide interior access to the house to your representative and will meet with your
representative with 48 hours notice.
As an auction date is pending in the very near future, (January 12, 2010) we believe TIME IS OF THE ESSENCE in resolving this matter. We are prepared to close this transaction within 5-10 business days from receiving written notification of your acceptance of this offer or our acceptance of any counter offer that you may make in response to our offer.

If you have any questions, please do not hesitate to contact us as necessary as we stand ready to
facilitate and expediting a short sale payoff on the aforementioned loan.

Sincerely,

Your name

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Comments (2) Jan 05 2010

Short sales document: the reduction letter

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Another document you may need time to time is a letter for the lender asking for a price reduction.
Here is an example below that you can copy/paste.

Date

Bank Name
Loss Mitigation Department
Address
City, State Zip

Re: (account number)

Dear (enter negotiator’s name) or To Whom It May Concern:

This property has been a difficult sell from the beginning. It has been listed for (enter # of months) as you can see by the enclosed information we have had multiple showings, but the feedback shows that the price is too high and the (condition of the property,) more importantly is the real problem.

We hardly had any showings at the original price and since we have dropped the price the showings have increased, but still no offers to date. This home is not in the best condition for the area. Please review my photos that I have also enclosed.

The recent sales in the area have been an average of (enter # of days) on the market and have brought (XX)% of the asking price. Please also analyze this information as well.

My hopes are that you will consider an immediate price reduction to (enter dollar amount) in order to get an offer on the table. The sellers have been very cooperative with regards to making the home available for showings.

Our market continues to struggle and the outlook, as I’m sure you are aware, is less than desirable for sellers. We are also seeing a decline in prices in this and most areas in close proximity to (enter property address). Please be assured I am working very hard to get this property sold and would sincerely appreciate any and all cooperation on your behalf.

Please let me know your thoughts of this request.

Sincerely,

Signature
Printed Name
Contact Information

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Comments (0) Jan 03 2010

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