Short Sales are not easy transactions and this article will deal with the many facets of this transaction. A seller of a property does not have a choice about which bank they will do a short sale with, but agents do need this guide to help them package and have approved a short sale in record time. Agents now have help from the government in this process. It is time to ask yourself, "Is the new electronic filing more efficient than dealing with Loss Mitigation officers one on one?
The government has now implemented a plan to aid banks and Realtors in the closing of short sales. Effective in April of 2010 banks will have ten days to approve or reject a short sale package. A package can only be submitted once a viable offer is in escrow with an earnest money deposit. The buyer must be fully qualified also.
The new Obama plan will give the seller moving money in the amount of $1500 and compensate the 2nd trust deed with $3000. This amount should help negotiate any lien on the property, but it is possible that it will not be enough. Many agents in the past have turned down short sales due to the fact they had no ideal how to negotiate additional liens on the property. Hopefully these new guidelines will help in closing many short sales, whether with Bank of America or Wells Fargo Bank.
Bank of America Short Sale Guidelines:
Bank of America has a new electronic program called Equator. It is "suppose" to make filing a short sale more efficient and faster in reaching the main Loss and Mitigation Department. As part of their program, the bank requires each homeowner to seek modification with the HOPE program prior to applying for a short sale. So the ten day guideline specified by the government would only begin when all other requirements are followed.
As part of the short sale package, the owner must submit a HUD-1 statement. Any package without this statement must have their package delayed until this statement is submitted. Any short sale package that is not complete,could see weeks in delays as the package would be put on the bottom of the pile. Once the home is sold Bank of America wants to have the Realtor submit a request through their electronic system for a short sale. The bank will look at the figures and then answer as to whether a short sale is desired by the bank. This process should take no longer than four days.
After the original request is approved, the bank will order a full appraisal of the property. It is possible to fight the appraisal, but it is good to have all comparables ready for the appraiser to see your side. After the appraisal is back and agrees with the selling price, the bank will want the following information:
*Purchase price and Net sheet
*HUD 1 statement
*Funds and/or a earnest money deposit in escrow from the borrower
*Information about the buyer
*A deficiency letter signed by the borrower
*Explanation of the hardship
*Most recent month's income verification or if self employed, last 3 months P&L
*The most recent year's tax return
If the short sale package is approved, the loan will need to be closed quickly and normally the Broker's commission is reduced. It is wise to expect that the bank will take longer than ten days to reply. While waiting for final approval, continue with the loan so that the buyer can move as soon as possible. Bank of America is easier to deal with than Wells Fargo in short sale negotiations.
Wells Fargo Short Sale Guidelines
Wells Fargo like Bank of America want to see the home sold first. The listing agent will normally contact the Loss and Mitigation department that the home is listed and fax comparables on homes recently sold in the area (very low end ones). After the home is sold all the items listed above will be needed to be sent to Wells Fargo Bank.
The package should be mailed in hard copy to the bank and one faxed also. When contacting the bank that the home is listed, Wells Fargo will send their guidelines by return fax along with the commission that they will pay both the selling and buyers agents. Commission is never negotiated. Most banks feel that if they must compromise on price so should Brokers.
Wells Fargo does not have an electronic system, but they must comply closely with the government's guidelines to approve a short sale in ten days. Wells Fargo is harder to get approved than Bank of America and the person submitting a short sale through Wells Fargo should be prepared with a complete application that will be closely scrutinized by their loan committee.
Be careful not to lie on the application as all facts will be checked thoroughly. Normal procedures with all banks is to order a credit report from all three bureaus, appraisal of the property, verification of employment, bank deposits and recent withdrawals. If there is money in the bank, remove it prior to beginning a short sale.
Bank of America vs Wells Fargo:
No matter which of these very large banks you are dealing with, they will be thorough and tough. Have your paperwork together prior to the home selling. Be prepared with many comparables to show your selling price and have a hardship of the sellers documented. The banks will not accept a short sale below market value. It is your job as agents to search for very low comparables and fight for the short sale (fiduciary duty).
Having a short sale close quickly means to be prepared with a complete package and it means using tact with the officer involved on the case. No matter what they say, agree and then thank them. After this transaction is closed, you will hopefully see many more referrals.
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