Sellers Short Sale Listing and Buyers Short Sale Purchase – The Short Sale Transaction
When a Seller decides to sell their property and owes more money on their mortgage loan than the property is worth, they list the property as a “Short Sale”. The listing agent contacts the Seller’s mortgage company on behalf of the Seller and informs the mortgage company (also known as the Lien Holder) of the Short Sale listing. Once an offer to purchase the property is submitted and accepted by the Seller, the listing agent submits the offer with the Seller’s Short Sale Package to the Lien Holder. The accepted offer is subject to the Lien Holder’s terms, conditions and approval of the Short Sale. The Lien Holder starts the Short Sale process by reviewing all the documentation. The Lien Holder will also order an appraisal and/or a BPO (Broker’s Price Opinion). These documents will provide the Lien Holder with a market value of the property. In some cases, if the Buyer’s offer is too low for the current market value, the Lien Holder will either counter back to the Buyer or reject the Buyer’s offer. If the Lien Holder rejects the Buyer’s offer, the Buyer can always re-submit a new higher offer.
For the Buyer, the Short Sale transaction is very similar to a standard transaction with the exception that all terms and conditions of the Buyer’s offer are subject to the Lien Holder’s approval. In some cases, the Seller may have more than one loan on the property. If this is the case, all Lien Holders will need to agree to take less than what is owed on the loan and approve the Short Sale in writing and submit a Short Sale Approval letter to the Seller.
There is no guarantee the Lien Holder will agree to take less than they are owed, even though it saves them money on attorneys’ costs, foreclosure companies’ costs, eviction costs, holding costs, etc. However, in today’s market it appears that more Lien Holders are approving Short Sales. The process can take anywhere from 30 days to 90 days for the Lien Holder to approve the Short Sale
Once the Short Sale has been approved by all Lien Holders
and the terms and conditions of the Short Sale have been reviewed and accepted
by both the Buyer and the Seller, the Buyer’s accepted offer to purchase the
property can start like a normal transaction. Escrow is opened and the time
frames begin. Typically, time frames begin from the date the Lien Holder
approved the Short Sale which is stated on the Short Sale Approval letter. The
Seller will provide all documentation to the Buyer required by California Real
Estate Law. The Buyer will be given a time frame to complete the
investigations, review reports, review and accept disclosures and obtain full