Doing a “short sale” in Ann Arbor and Washtenaw County

Every day, I am seeing more and more homes listed in the MLS with the remarks, “subject to a short sale” or “subject to third party approval.” Some neighborhoods are loaded with them. Some communities are loaded with them.

What does a “short sale” mean?

A short sale is when the homeowner, can not sell their home in the current market conditions at the price of what they owe the bank on their house or condo. Therefore they ask the bank or lender to accept an offer on the property that is less than the amount owed. This is called “selling short.”

Before selling a home “short”, the homeowner must have missed payments on the home and the house must be listed.

When I do a listing presentation and must tell a homeowner that their home will not be able to sell at the price they owe, we discuss “short sale” as an option. Not everyone will be able to sell their home as a “short sale”. If the homeowner has a good job, lots of assets in the bank or investments it is unlikely that the bank will agree to it.

The first thing I do as a Realtor is to have the homeowner or myself, ( must have the authorization form) signed by the homeowner for me to speak with the lender and order a short sale package from the bank or lender. It usually takes 72 hours for the bank to process the authorization form and for me to be in their system so that I am allowed to speak to them about the homeowners situation.  At that point I can find out how much they owe, explain the homeowners situation and try to work out a plan. Included in the package called a “loss mitigation package”, is the requirements for a short sale.

The homeowners must write a “hardship letter”, explaining why they need to sell, and the reasons for the hardship.

When I see a home listed as a “short sale”, the first thing I do is call the Realtor and ask, what has been done to move the sale along. If they have done nothing, then it is best for my teams buyers to move on and find another house or condo.  It takes the patience of Job to wait on a response to a short sale offer. If the package has not been ordered, assests, bank statements, W2′s and the hardship letter written you are in for an even longer wait. If a buyer needs to be in a home in 30 to 60 days, it is best to find a home that can be closed within that time period.

We have been waiting three months on a lake house, the seller was trying to sell “short”. The lender would not accept a short sale, the home went to foreclosure and is now with another company, which still does not have the paper work from the servicing institution. Fortunately, this is a second home so our buyer can wait it out.

I’ll post more later on why banks let homes go into foreclosure and why they would rather do this than accept a “short sale”.  If you are a buyer and looking at writing an offer on a short sale, make sure your Realtor is familiar with doing them, make sure the loss mitigation package is ordered, make sure the Realtor has permission to speak with the bank and make sure the hardship letter has been written.

If the listing agent is not able to say “YES” to all of the above, it is best to find a different house.

As more and more homeowners are asking the banks for short sale relief, it is critical to work with an agent who is knowledgeable in understanding and working the short sale process. Just because a home or condo is listed in the MLS, as “short sale” or “third party approval”, doesn’t mean the agent or the bank has agreed to it and the necessary documents are gathered.

The Mortgage Forgiveness Act was signed into law in January 2007,  read the document in it’s entirety as it applies to the Principal Residence Exemption on selling a home short.

***Begin your home search here.***

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