By Meredith, Executive Assistant

Agents and sellers alike are often daunted by the ins and outs of the short sale process. Collecting documents, communicating with the bank, negotiating with an investor, all while knowing that a family may face foreclosure in the near future – it is a stressful prospect. Licensed short sale negotiators such as LMS Law LLC are happy to use their experience and knowledge to your advantage. But what is it that these negotiators actually do? In this four-part series, we’ll take a long look at short sales and what actually happens at the banks when the documents are submitted.

Part II: From ATP to BPO

Many banks will accept short sale “pre-packages,” containing listings and other documents related only to the seller. If the seller has an FHA loan, the review process is quite a long one, analogous in many ways to the normal short sale process, but it is used to confirm short sale eligibility rather than short sale approval. At the conclusion of this FHA review, a document called an Approval to Participate (ATP) is issued. This document spells out the minimum net proceeds the bank requires, as well as a minimum purchase price for the home. Once the purchase price is set, it cannot be changed or negotiated.

Agents often hear stories about short sales that are approved in a week, or even two days; these are typically FHA short sales. There is some truth to these stories, though because once the purchase price is defined on the ATP, it’s simply a matter of securing a buyer who can meet that price and quickly moving forward from there. The catch is, of course, the extremely long review process that precedes this document, which is often several months to sometimes a year long.

For conventional short sales, the real work begins when a contract is ratified. The contract and its supporting documents, along with any straggler seller documents, are sent to the bank alongside a preliminary HUD-1 document. The bank then confirms whether the file is complete. Often, updated financial documents are needed to keep the file current. The processor communicates any needs to the seller or the agent, and the file moves forward.

Title work is also ordered at this point. Unlike in a traditional real estate transaction, the bank must approve all fees on the seller’s side of the HUD prior to settlement. It is vital to know whether any liens are tied to the property, so that they can be negotiated. A title search allows all parties to avoid the nasty surprise of discovering hundreds of thousands of dollars in medical liens a few days prior to settlement, for example.

This portion of the short sale continues until the bank orders a Broker Price Opinion (BPO). The BPO requires a licensed real estate agent, working on the bank’s behalf, to visit the property and determine the property’s value, based on the condition of the structure and the grounds, the location, and other factors. This value opinion is then presented to the bank, and becomes the main guideline for the investor’s review of the file. It is important that the Listing Agent meet the BPO agent at the property to discuss any issues the property has.

Once the BPO has been completed and processed, the file moves into review with the investor. In the next article in this series, we’ll take a close look at the investor’s review process, and why it’s such a crucial – and often frustrating – part of the short sale.

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