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I wanted to write this post to give you an idea of how obtaining a mortgage for a short sale will differ from a private party or bank owned home.

When you make an offer on a foreclosed home, you are dealing directly with the bank because they are the current owner. The bank has already completed the foreclosure process, set the sales price, and are actively waiting for offers to come in so they can sell the home and get it off their books.

A short sale is a little different in that the bank does not technically own the property… they only have a mortgage lien against the property. When you make an offer on a short sale home, your offer goes first to the homeowner for their approval and signature. Then the accepted offer is sent to the bank(s) that hold the mortgage lien(s) for the home in order to obtain a short sale approval.

The short sale approval is a document that gives the homeowner permission to sell the home for a specified amount and the bank agrees to release the mortgage lien even though they will not be paid in full. This process can take days or months… it really just depends on the bank(s) that currently hold the mortgage lien(s) for the home.

When you make an offer on a bank owned home, you usually know right away if your offer is accepted. Making an offer on a short sale is a little different in that the bank has to get clear about the current value of the home through broker price opinions and appraisals. They also need to review the current owner’s hardship and financial documents to make sure the owner qualifies for the short sale. This is what takes so much time and can test your patience as the home buyer.

If you are patient and do your homework upfront, purchasing a short sale can provide you a great way to get a deal in today’s market with less competition.

Even though the bank takes their time making the decision to approval the short sale… they will often ask the buyer to close escrow in a matter of weeks once the short sale is approved.

Right now the real estate market can be a little hectic. Mortgage lenders are picking apart perfect files and closing escrow in less than 30 days can prove to be a real challenge.

In order to make sure your loan goes through as quickly as possible here are a couple tips:

•1. Make sure you work with a mortgage professional who asks you for a complete loan file upfront!
A complete loan file should at least include (tax returns and W-2s, 2 months banks statements, most recent retirement statements, and 30 days worth of pay stubs). You need to make sure you are working with someone who will take your loan seriously and thoroughly review all of your documentation looking for red flags. Your mortgage professional will want to do as much work upfront as possible so there is no time wasted tracking these items down once you are in contract.

•2. Keep a file for new information as it is received!
You will want to create a file where you can hold any new bank statements, paystubs, or retirement statements as they come in. Your mortgage professional will needs these items once you are in contract. The quicker you can get these items to them, the quicker your loan can be submitted.

•3. Respond quickly to your real estate agent or mortgage professional when they ask you for something!
Even though you are in escrow… life still goes on as normal. You need to make it a priority to get back ANY items requested of you as quickly as possible. Remember your real estate team can only work as quickly as you allow then to! Every day wasted just makes your real estate transaction that much harder to close.

If you have patience, understand the short sale process upfront, and respond quickly when asked…short sales can prove to be a pot of golden opportunities for a homebuyer!

I hope this information has helped you understand the short sale process better. Please post a comment if you have any questions on this topic and I would be happy to answer them!

As always… Happy hunting!

Erin Newington
First Priority Financial
(916) 687-6868