The short sale process is more complicated than a traditional real estate transaction, with numerous decisions along the way that can make or break a deal. Here are three of the most common mistakes that I see, and advice on how to avoid them.
Mistake #1: Assuming the bank is working on the transaction.
Just because you’ve submitted all the right documents to the lender doesn’t mean the process is moving forward on their end. Over the years we’ve sent countless reams of paperwork to lenders only to find that no one there has any record of receiving them. Regular confirmation and follow-up is critical. Your transaction may be one of thousands that the bank’s negotiator is working on at any given time, so it’s easy for your documents to get lost in the shuffle. Persistence and patience pay off big dividends in short sales.
Mistake #2: Thinking lender approval of an offer will automatically postpone foreclosure proceedings.
Several of our clients have received a letter of approval from the bank for the sale of their property only to receive a notice of foreclosure from that same lender a few days later. Loss mitigation and foreclosure are handled by separate departments at the bank, and they rarely communicate with each other. You need to be the communication bridge for your client and insure that all parties have the information necessary to postpone foreclosure and move the sale forward.
Mistake #3: Assuming that the short sale approval letter includes satisfaction of the seller’s debt.
We always negotiate with lenders for satisfaction of our seller’s debt, and have an excellent track record of achieving that goal. The short sale approval letter needs to clearly state that the lender is agreeing to waive all rights to the deficiency. Unfortunately, many approval letters contain ambiguous language. Make sure and clarify any language in the document before your seller signs or they risk having the lender come back at a later date to collect any balances due after the sale. You can find further clarification of the difference between a full debt satisfaction and a lien release in our Short Sale FAQs.
If you are working with a buyer or seller on a short sale and have any questions, I’d be happy to provide you with advice free of charge. I’m a Windermere real estate broker and a partner in Washington Property Solutions, a short sale solution provider. Our goal is to help brokers like you provide the best possible service to their clients in the short sale process. We pay a 30% referral fee.
If I can be of any help, please give me a call at (206)612-5541 or email me at email@example.com.