How to Sell Your Home in a Short Sale

Home short saleIf you want to know what a short sale experience is really like, just ask Erin. In 2005, Erin and her husband, then newly married, purchased their first home, in Sacramento, Calif., for $350,000. Just three years later, her husband's commodities business was in decline and their financial situation soured to the point where they couldn't keep up with their monthly payments.

The couple considered renegotiating the terms of their loan with their bank, which might have extended the life of their loan for 10 additional years. But considering that their home lost half of its value, the prospect of spending the next 40 years to pay off their mortgage seemed less than desirable. That's when they entertained a short sale.

"I've always considered myself to be an honest and forthright person, and there is no doubt that in making the decision to short sell I was, in fact, breaking my word and a promise I made to the bank to pay off their loan in its entirely," said Erin. "But when I step back and look at the big picture -- at the banking industry, all of the broken promises it has made to homeowners like myself who were manipulated into truly lopsided loans, and the reality of my financial situation -- it was clear that the short sale was our best and most viable option."

Stories like Erin's are certainly not rare. A short sale occurs when a homeowner in poor financial shape sells a home for less than the amount due on the mortgage, with all the proceeds going to the lender. They offer an appealing alternative to foreclosures, but that doesn't mean that it's an easier process to endure. Here's an overview of what a homeowner should do when considering selling in a short sale.



1. Talk to people

After enduring a financial hardship and finding out that your home is underwater, your first steps should be to talk to three key parties: a CPA, a real estate attorney and a qualified real estate agent.

"Each state has its own laws regarding the lender's ability to come after the borrower for a deficiency after the sale or foreclosure, so it is highly recommended that homeowners discuss their situation with all three of these people," says Bob Hertzog, a real estate broker with Summit Home Consultants in Phoenix. He adds that in some cases, it might be better to just go with a foreclosure or bankruptcy filing. Consulting with these three parties will help you to confidently go forward with the short sale, or to learn early on whether or not you should go another route altogether.


2. Find the right agent

If your discussions lead to a decision that a short sale is the way to go, it's time to choose the best real estate agent available. While many agents will tout themselves as short-sale experts and tag on fancy titles and certifications to their names, many times these are nothing more than titles granted after completion of a course. If you want to use titles as guidelines, keep an eye out for Certified Distressed Property Experts (CDPE) or National Association of Realtors Short Sale Specialists.

Beyond titles and organization names, it's important to ask questions like, "How many short sale listings do you currently have? How many short-sale listings have you lost to foreclosure? Can I have the names and phone numbers of your last five short-sale listing clients?" "The short-sale process lives and dies with the listing agent," says John Makarewicz, a real estate agent in Atlanta who specializes in short sales. Also, be wary of scammers who offer things that sound too good to be true.


3. Find the true value of your home

Before embarking on the long process of a short sale, homeowners should verify the value of their home. This can be done in several ways. If you're trying to do as much work on your own, you can use tools like AOL Real Estate's home value generator to approximate the value of your property by comparing it with the values of similar, neighboring houses. You can also look to your real estate broker to give you an estimate. A third option is to get an estimate from an independent appraiser. One way to do this is to search the Appraisal Institute website to find an appraiser in your area. "Too often I will see homes listed way below market value marketed as a short sale," says Makarewicz. "The banks are not dumb and they are looking for as close to market value as possible."


Search Apartments and Homes for Rent See photos of apartments and homes for rent in your area on RentedSpaces 4. List the home at the right price

The price that the home is listed at is a key step in the short sale process. It should be slightly above market value, and the price should be lowered at pre-determined intervals until an offer is received. This will appease your bank by showing them that you tried to do your best to get them the most for your home.

"Not only do you need an attractive sales price to entice a buyer to go through the shenanigans inherent in a short sale, but you need to satisfy the bank's appetite for profit," says Elizabeth Weintraub, a broker-associate at Lyon Real Estate and writer of the homebuying/selling guide at About.com. "If you can't give the bank a decent sales price, the bank might reject the short sale."


5. Get your package together

Once an offer is received, it's time to start building your short-sale package. Your lender will require a number of documents, including a hardship letter, your tax returns from the last two years and your last two pay stubs, among other things. When all is said and done, the whole package could be 60 to 80 pages long, according to Hertzog. It's essential that all required documents are included in the package, as banks will look for any and every reason to put off your short sale.


6. Wait

Now it's all about patience, a key part of the short-sale process. It could take about 30 to 45 days for the lender to get your short-sale package, put all the information on their system and assign the sale to a negotiator -- in some cases, it could take up to three months.


7. Negotiate

The negotiator from the lender will offer a broker-price opinion (BPO), or an appraisal, of your home. Typically, if the offer you've received is within 5 percent of the BPO and if all necessary information is given to the lender, the short sale will be approved. If the offer is too low, the lender could counter with a higher sale price. This may lead to some back-and-forth negotiating, and buyers may come and go, but keep your agent close and don't get discouraged. This is all part of the game. The entire short-sale process could take six weeks, while others may take a year or longer.


After 14 grueling months of negotiating and nitpicking from the bank, Erin completed a short sale of her home in May. The long, involved process of short selling her home was a true team effort. "A short sale is not for the faint of heart and having a team of Realtors to work with that's well versed in the art of short selling is a necessity."

For more about short sales these AOL Real Estate guides can help, whether you're buying or a selling:

More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.


************************************************

Want to learn more about home buying and home finance? If so, you won't want to miss
our online discussion with industry experts,
"What Works Now: Smart Moves When Buying a Home,"
created by AOL Real Estate in participation with Bank of America Home Loans.
Watch it now on AOL Real Estate.

Add a Comment

*0 / 3000 Character Maximum

17 Comments

Filter by:
gboyer913

Point #2 says "If your discussions lead to a decision that a short sale is the way to go, it's time to choose the best real estate agent available. While many agents will tout themselves as short-sale experts and tag on fancy titles and certifications to their names, many times these are nothing more than titles granted after completion of a course. If you want to use titles as guidelines, keep an eye out for Certified Distressed Property Experts (CDPE) or National Association of Realtors Short Sale Specialists."

Both the Certified Distressed Poperty Expert and NAR Short Sale Specialists are designations after taking a 2 day course. Hire experience not Certifications any one can puchase.

August 09 2011 at 1:31 AM Report abuse rate up rate down Reply
Setanta

a short sale should not have taken fourteen months !

August 09 2011 at 12:11 AM Report abuse rate up rate down Reply
pj512

"But when I step back and look at the big picture -- at the banking industry, all of the broken promises it has made to homeowners like myself who were manipulated into truly lopsided loans, and the reality of my financial situation"

See, this is part of the problem. Homeowners being "manipulated" into lopsided loans. I'm sorry, but if you are going to buy a home, you better be smart enough to see the big red warning signs. When I bought my house nearly 13 years ago, it was in the back of my mind that if I ever lost my job, I may have to sell it, so I didn't buy more than I could afford (a little less, actually). And when I was offered an adjustable rate mortgage, I said "no thanks" and went for the fixed rate, knowing I could refinance at a lower rate later. Now, I've been unemployed for over 1-1/2 years and have rented my house out so I could keep it.

August 08 2011 at 8:38 PM Report abuse +1 rate up rate down Reply
mrshowell2001

To Dale Wrathall,
I'm a realtor who does short sales, and I would never defend some of the banks. But I do know one thing from experience- these banks are dealing with thousands upon thousands of short sale requests. Each one has a package that can run as much as 150 pages. If every page is not identified with the seller, address and loan number, the bank doesn't know which property it is- result, file 13.
To be done properly and successfully, you need a realtor who knows what they're doing, & who has a full time negotiator to assemble, identify and submit the package. The realtors negotiator will have the time and experience to sit on hold, ask pertinent questions and develop a working relationship with the bank's negotiator. No homeowner has the time, patience and knowledge to do those things. (And BTW, I HAVE had a brain tumor!)

August 08 2011 at 5:00 PM Report abuse +1 rate up rate down Reply
1 reply to mrshowell2001's comment
flysalot2

You hit the nail on the head...I am also a Realtor and have a skilled negotiator who works for me. Short sales are still hard but we have a high success rate of getting them through.

August 08 2011 at 6:13 PM Report abuse rate up rate down Reply
billscaf

You do NOT WANT to get a Realtor who calls themself a ' SHORT SALE SPECIALIST'. You want a lawyer who specializes in short sales to handle the negotiaions. Any Realtor can list the house at the right price and market it but it is important to hae a lawyer do the legal work and negotiations with the bank. The lawyer might want a small part of the commission but they are worth it. Every time I work on a short sale deal that is listed by a 'SHORT SALE SPECIALIST" the deal falls through!!

August 08 2011 at 4:56 PM Report abuse rate up rate down Reply
3 replies to billscaf's comment
MSP

My Six Percent is a website that walks the user step by step through the home buying / selling process. We are free to use, very organized and intuitive, and we hope you stop by if you're in the market to buy or sell.

www.mysixpercent.com

June 27 2011 at 6:25 PM Report abuse -1 rate up rate down Reply
Dshdge Sdgew

14USD e d har dy T-shirts,C00gi T-shirts,Christian Audigier T-shirts,Gucci T-shirts,Polo T-shirts.
25USD c0ach handbag,gucci handbag,prada handbag,chanel handbag,
12USD sunglasses,9USD caps.
Please visit---- http://www.voguecatch.com ------

June 26 2011 at 8:57 AM Report abuse -4 rate up rate down Reply
Dale Wrathall

I am worried about Bank of America and its Real estate Short Sale Department. B of A has been showing signs of ALZHEIMERS Disease.
The symptoms seem gradual and progressively worsen.
1. Memory problems such as, did we get the Paperwork? That question has been addressed several times with the same answer. YES.
2. Oh was there an offer made? Answer 19 times
3. Symptoms such as, inability to perform simple tasks. Example. To retrieve information from FAX Machine or download information from computer.
4. Problems remembering people such as customers wanting to purchase short sale property.
5. Short tem memory loss. Example, did you want to continue the short sale process? Sending out appraiser several times with same results. Value at or just below buyers offer.
6. Problems speaking or behavior problems. Example, Their mind seems to drift while offers are in place. Going back to previously discussed issues. And then forgetting there was an offer made. The Short Sale department seems almost catatonic.
Could B Of A suffer from other causes such as, Stroke Infection, Brain Tumor or a Metabolic problem. OR IS IT JUST PLAIN STUPIDITY AND GREED!!!!!!!!

January 22 2011 at 3:18 AM Report abuse +1 rate up rate down Reply
1 reply to Dale Wrathall's comment
SirTiffied

Dale, that's not the first, but the best analogy I've heard in a while. Sometimes all we can do is entertain ourselves. I have a similar short sale example on this blog I just started. I'd appreciate any comments related to incentives for the servicer to ignore mod/short sales and specifics. http://hampmodificationhelp.wordpress.com/

February 16 2011 at 8:25 PM Report abuse -1 rate up rate down Reply
setgrehrvc

"Not only do you need an attractive sales price to entice a buyer to go through theI am an Air Force and seek ing someone .I need a woman who can love me back ...I also uploaded my hot photos on kissmilitary.com nder the name of jay55..It's the largest and best club for seek ing Army, Navy, Marines, Air Force, Police Force, and the admirers of those who wear the uniform.I just hope you don't mind me being a soldier ...Please Check it out!I'm serious

January 22 2011 at 2:44 AM Report abuse -7 rate up rate down Reply
m2talo

Idid my own short sale and sold my home in 8 weeks.
anyone under water can email for tips.
The work is for you and to do and not anyone else.

thanks

January 21 2011 at 11:15 PM Report abuse rate up rate down Reply
1 reply to m2talo's comment
Shon

Hello Em,

I am currently underwater and behind on my mortgage. I would be interested in your tips for doing your own short sale.

January 22 2011 at 2:47 PM Report abuse rate up rate down Reply
1 reply to Shon's comment
billscaf

Shon, consult an attorney who specializes in short sales. I am a Realtor and I can tell you that a Realtor can certainly list and market your house but you NEED an attorney doing the negotiations with your mortgage company,

August 08 2011 at 4:59 PM Report abuse rate up rate down