When negotiating a short sale, there are more than a few steps to take before we can finally receive that approval letter. It’s important that you realize you cannot just skip some of the crucial steps and hope to have a successful short sale transaction. Do not try to submit too low of an offer to the lender.
In order to be successful at negotiating short sales, you have to be able to get inside the head of the lenders to understand what they are thinking during those negotiations. Truth be told, all they’re thinking about is which course of action will cost them the least amount of money in the long run. If they find any loopholes to collect that debt, they will be sure to. When they see a chance to avoid a long-term bad debt, they will generally move in that direction. Lenders have formulas they must abide by and know how much it costs to continue to collect debts and maintain bank-owned properties. They are aware of exactly how much money they lose when they allow a property to go to foreclosure.
Therefore, these are my straightforward tips for negotiating a successful short sale.
1. Get the highest and best possible offer on your house. This is where it makes the most sense to use a licensed real estate agent so they can get your home on the MLS and do all the marketing for your house. The more people that will come view your listing, the more people that will show interest in making an offer.
2. Once you have an offer, be sure to consult an attorney to make sure you are aware of your rights.
3. Be persistent. Contact your lender every couple days, if not every day. During your first call with your lenders, let them think you will be the thorn in their side until they accept your offer. Lenders are swamped with foreclosures, right now. The only way to push things through is to be persistent, yet nice. Our professional negotiators will do this for you.
4. Contact the Loss Mitigation department. Customer Service will not be able to help you through the process. Once you submit your complete short sale package, find out which loss mitigator it was assigned to. Do this immediately. As mentioned above, they are slammed with foreclosure paperwork, so you checking in, may help them keep your package from getting lost in the shuffle. Our professional negotiators handle this too.
5. Find out if the loan is FNMA (Fannie Mae), FDMC (Freddy Mac), FHA (Federal Housing Administration), VA (Veterans Affairs), or Conventional. Be sure to ask the loss mitigator which owns the loan and take note of this. Each investor has their own idea of how much they are willing to accept from the short sale. Also, keep in mind that the bank does not own the loan. They are only the service provider. Guess what? We do this too.
6. Ask the loss mitigator to get an interior appraisal or BPO (Broker Priced Opinion) as soon as possible and summarize your offer to the mitigator. It’s very important that you manage the BPO effectively. Yep, this too, and we make sure the agent has the comps that support the value we are trying to get approved.
7. Pull a title report after the BPO is complete in order to resolve all outstanding issues that could come up at closing. We want to make sure no last minutes liens are going to sneak up and kill our deal.
8. Ask the bank for the amount of the BPO. There is a chance that they won’t share this, but there is no harm in asking. If the lender refuses to disclose the BPO, you need to ask for a counteroffer. Once they make that counteroffer, this will generally be equal to the amount of the BPO. We handle this for you too.
9. When you submit your counteroffer, include additional documents to support the amount you’re offering. You can use low comps, repair estimates, inspection reports, negative news articles about the neighborhood, as well as the MLS listing, which will show the number of days the house has been on the market. We got you covered on this too.
10. Find out whether or not you will be responsible for the deficient amount. If so, ask for a release of deficiency. In some cases, you may not be held liable for the remainder, so this is something you really want to find out about. We’ll ask but this is negotiating a legal instrument and falls more to the attorney to handle.
11. (Bonus Tip) It’s very important to keep in constant contact with your mitigator and remain proactive. Let them know that you’re doing everything possible to get them the highest amount possible for the property. Remember, it is important to make sure you have a strong offer for the house. We stay in touch with them, but need you to stay in touch with us. The majority of our unsuccessful short sales are the result of homeowners giving up and not returning our calls. Never give up and and there are really good chances that you will be able to successfully short sale your home and avoid foreclosure.