Listing Short Sale Properties
my newsletter on short sale contracts generated a lot of interest, I am
writing a follow-up on how to list short sale properties. While
short sale approvals often occur after getting a property under
contract, you will likely have more sucess in closing if you go through
the short sale approval process at the time of listing.
First, you must find out if your client meets basic eligibility
requirements. Short sales are only available to relieve verifiable
financial distress such as a lost job, income reduction, or high
medical expenses. In addition, you should determine if your client
has already worked with the lender on a loan modification or other
required alternative to a short sale. For many loans, an attempted
modification is necessary before moving on to a short sale.
However, a borrower can often skip the modification attempt and go
straight to a short sale merely by requesting a short sale.
Second, before approaching the lender, make sure your client meets the
requirements that appear in many short sale programs. Among the
most common requirements are the following: (1) the property is the
borrower's principal residence, (2) the loan closed before January 1,
2009, (3) the borrower is delinquent in payments, and (4) the value of
the property is less than the loan amount. Your expertise in
rendering a broker price opinion will be very helpful on the last item,
although the lender must rely only on its own appraisal.
Third, your client must find out the lender's specific short sale
requirements and go through the process of entering into a short sale
agreement. The requirements will vary depending on several
variables such as the type of loan, the loan servicer, the loan owner,
and the loan guarantor (e.g. FHA, Fannie Mae, Freddie Mac), if any.
Fourth, you can anticipate many of the terms that the lender will
require in the listing agreement and sales contract. Frequent
terms include the following: (1) the marketing period must be a minimum
of 120 days, (2) the real estate commission cannot exceed 6%, (3) the
listing agreement and sales contract must contain cancellation and
contingency clauses supplied by the lender, (4) the lender will
set the listing and/or acceptable sales price, and (5) the sales
contract must restrict the purchaser from selling the property again
within 90 days of the short sale closing.
If you want more complete information on how lenders process and
approve short sales, you can find helpful information and links to
different program requirements on the website of the Department of
Housing and Urban Development at:
Preforeclosure Sale F.A.Q.
not hesitate to contact me to receive more information on this topic or
to suggest topics for future editions of 'A Legal Moment'. You may not
rely on this content as legal advice for any specific situation, but
should instead contact an attorney for specific advice.