Further Considerations Regarding The Short Sale Process
Posted by Lisa Mallon on Tuesday, November 24th, 2009 at 8:56am.I receive frequent inquiries from my Marin Modern clients and friends about properties being sold as Short Sales in Marin. Although there are many different lenders involved in Short Sales, all with their own internal procedures, there are a number of common steps in the process which I would like to briefly address.
HOW LONG DOES THE SHORT SALE PROCESS TAKE?
The short sale process can take approximately 45-90 days. The lender must obtain:
- its own appraisal of the property
- review all of the documentation submitted by the homeowner
- seek authorization from the investor and/or insurer on the loan
WHAT ARE COMMON REASONS FOR A LENDER'S DECLINE OF A SHORT SALE?
Short sales are declined for a variety of reasons, the most common reasons include:
- The offer is not at fair market value and does not represent a mitigation of loss relative to an REO sale
- Insufficient information was provided to process the transaction
- The transaction does not represent an arm-length sale
- The investor, insurer or subordinate lien holder will not approve the sale and accept the loss
- The homeowner will not contribute to the loss or sign a promissory note if required
Frequently, despite one appraisal having been completed, another one is necessary. This is due to the fact that the investors and mortgage insurers on loans both require a current, independent appraisal, regardless of the other appraisal. Additionally, several large lenders allow for the payment of closing costs that traditionally are paid by the seller. (i.e. commissions, appraisals, taxes, etc.)
I've seen in a number of recent situations locally in Marin County where multiple offers on a short-sale property are all below market value. Many lenders lack the flexibility to accept an offer at less than market value. The independent appraisal sets the market value and so a higher offer provides greater likelihood of the Short Sale being accepted by all involved parties. Each lender handles these kinds of situations on a case-by-case basis.
OTHER SHORT SALE CONSIDERATIONS:
- Any homeowner whose mortgage loan(s) are current (not delinquent) will probably not be considered for a Short Sale by their lender(s) unless there is sufficient documentation to demonstrate imminent hardship.
- There are a myriad of tax consequences which should be reviewed by a real estate attorney or tax accountant.
- Lenders will not allow a sale to anyone with close personal ties to the borrower. This is defined as an "arms-length" transaction.
-Some lenders will require the homewoner to sign a promissory note or make a cash contribution for some or all of the difference between the net proceeds from the sale and the total amount due on the loan.
-Junior liens and Home Equity Lines of Credit (HELOC) are considered in the Short Sale process. Many lenders typically request the borrower to negotiate with the junior lien holder(s) for funds to release their lien(s). This may delay the process and the junior lien holder may deny the Short Sale.
My colleague Erika Davito wrote an informative piece appearing early this year on Short Sales and bargain hunting in Marin County. Taken in conjunction with this post, I thought it would be useful to re-read if you have your eyes on a Short Sale property given the timeline I've discussed and the other steps in getting your offer on a Short Sale approved.
I hope you've found this posting helpful. Navigating the purchase of a Short-Sale property is possible but the likelihood of increasing your chances in having an offer approved is greater if you undertand the competing goals of the parties involved.
Feel free to contact me for all your Marin County real estate needs or for additional information regarding Short Sales in Marin. I look forward to hearing from you.
Lisa Mallon, Marin Modern Real Estate
Related Links
Print
Share
Be the first to comment on this blog entry!