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 III – The Investor Review; or, “Why Have There Been No Updates for Three Weeks?!”
At this point, your file has been completed. You have met the BPO agent at the property to bring any issues to light, and you know that the title for the property is clear. The negotiator informs you that the file is being sent to the the investor for final review! How excellent!
Three weeks later, though, there’s no news. The buyer is anxious, the seller is anxious, and when you call your trusted, experienced negotiator, their hands are tied. Why? What is happening?
The investor is the person behind the loan. Although a loan may be serviced by a bank such as Wells Fargo or Nationstar, the loan is often underwritten by an entity such as Fannie Mae or Freddie Mac, or by a private investor. The decision-maker at this organization has the final say on the short sale’s approval. Once the file is being reviewed, there are three possible outcomes:
- the investor will approve the short sale with its current terms
- the investor will decline the file
- the investor will issue a counter offer (the most common result)
Counters can be as simple as administrative changes to the HUD or as elaborate as value disputes and appraisals to contest the bank’s value. These back-and-forth exchanges with the bank are vital to the short sale. Sometimes, the investor will ask the seller to consider promissory notes, cash contributions at closing, or other measures which affect the bank’s bottom line, but not the purchase price.
These responses are presented to the negotiator at the bank, and the investor completes a shorter review. Often, the revised value is accepted, but occasionally another round of counters takes place before approval or denial of the short sale.
As the investor – especially the investor behind the primary mortgage – holds all of the power, there is no way to escalate a file to a manager or to speed the review process along. Even experienced, licensed negotiators such as LMS must be patient while waiting for investors. During this review, there are no concrete updates available about the file’s status. Unfortunately, some files are declined at this point.
Many offers are accepted. However, offers which cannot be supported by the local market, or by the property’s condition, will almost unanimously be declined. Although a short sale can be a great opportunity for a buyer to purchase a property below the local market’s value, ‘short sale’ does not equal ‘free.’
Once this approval is granted, there are a few loose ends to wrap up. In our next discussion, we’ll look at what happens between approval issuance and settlement. What is a deficiency balance? Will the bank issue a promissory note? Be sure to check back soon for answers to your questions!