The Short Sale Process from a Buyer’s Perspective

Many consider a short sale a win-win situation. The seller is freed from a mortgage payment that they are unable to make, the buyer purchases the home at a reduced price, and the bank avoids foreclosure on the property. Just the same, in my business, I find that many still find the short sale process a bit of a mystery.

The Short Sale Package

At the outset, the seller must submit a short sale package to the bank. Of course, this is a package that the seller’s agent will be concerned about, but many buyers wonder what is involved on the seller’s end (and this is understandable). This package will include, depending on the lender:

  • Cover Letter
  • Authorization & Release Form
  • Seller’s Hardship Letter
  • 2 Years W2s or Personal Tax Return
  • Copies of 2 Month’s Bank Statements
  • Copies of 2 Month’s Pay Stubs
  • Tax Returns for the Last Two Years
  • Most Recent Mortgage Statement
  • Financial Statement
  • CMA or Broker Price Option
  • Estimate of Repairs
  • Sales Contract or Purchase Agreement
  • Additional Documentation Varies with Each Lender

The Short Sale Process Continues

You may be wondering, “This is all well and good, however what happens on my end?” This is a great question and one that begs for a clear answer. Notice the following timeline:

The Short Sale Process - Buyer

Make an Offer

The first two steps speak for themselves. The buyers sit down with their real estate professional and discuss the value of the home. At this point, buyers are better equipped to discuss their bottom line. As well, the sellers will likely discuss their options with their own real estate agent.

Submit Documents to the Bank

We have already discussed what the seller has to submit to the bank. Communication, coupled with negotiation and patience, can go a long way at this point. The right real estate agent will keep you “in the loop,” and there will be no need for unnecessary frustration on your part.

The lender will want to see that you have been preapproved for a loan as well as documentation that you can afford to make the payments. Obtain a pre-approval letter from your lender.

The Offer is Accepted

After the offer has been negotiated and accepted, the bank will give you a date in which the contract must close or cancel. At this point, things can move quickly. The bank wants the property off their books and the seller is often motivated to be out from under their loan.

How Buyers Can Help

Understanding this process can alleviate much of the unnecessary stress that some face when purchasing a short sale. The following suggestions might help on the buyer’s end.

  1. Make a reasonable offer.
  2. Request that your agent keep you informed. What, if anything, might be holding up the process? If it is something on their end, respectfully ask why it hasn’t been done.
  3. Never feel that you can strong-arm the lender. The negotiation process is not to be tampered with by inexperienced buyers. In fact, your best efforts might slow the process considerably. It’s best to only deal with the lender when you have discussed it with your real estate agent or attorney.

The Bottom Line

The success rate will depend on your lender. In the end, you must keep your focus on your goal. You are purchasing a home for less than market value. In the end, many buyers, who have successfully purchased a short sale, are happy that they did so.

Contact us with all of your short sale questions. Over the past several years, my team and I have sold 100s of short sales and foreclosures.