Tag Archives: Short Sales

There are a lot of new sales associates who were not in the business when short sales were common, and institutional memory can be short.

In the last few months, we’ve seen a rash of short sales come up and we’re finding some sellers who are in a short sale situation and don’t realize it.

A short sale is a home that is available at a purchase price that is less than the amount owed by its current owner, and the owners are considered “distressed borrowers“ due to their financial challenges. They are behind on their mortgage payments, need to sell, and their home is underwater – it is worth less than the outstanding balance on the mortgage.

The transaction benefits the bank by allowing it to avoid repossessing the home in foreclosure, which is expensive and time-consuming. Though their credit may be impacted to varying degrees, the seller avoids the significant credit hit that comes with foreclosure and the bankruptcy that sometimes accompanies it.

Short sales require a lot of extra work by sales associates to facilitate approval by the lien holding institutions, and can take months to complete. Sales associates not experienced in short sales should consult with their managing broker before jumping in with both feet.

Don’t cause an unnecessary delay to your closing. Especially on a Short Sale, ask twice if the buyer is married if you see only one name on the contract.

When a contract is submitted to a Short Sale lender, the buyer(s) listed on the contract must be the same as those on the HUD and lender docs.

If, for instance, the wife (buyer) is the only one on contract but the husband needed to be on the loan for financing, the husband must be added to contract, initialed by all parties, and submitted to Short Sale lender for their approval.

If this is done after Short Sale Approval, then a new approval letter must be generated because the HUD will be denied by the Short Sale lender if the names do not match. This will cause a delay in closing.

Though this usually happens when married couples are involved, this rule applies to any change in the buyers’ names between contract and closing.

You can download the PDF for this tip here.