I have suffered through a number of short sale efforts and they have in the past often ended very badly. Sellers can (& do) get foreclosed upon during the short sale process or the Buyers lose patience with never ending requests for extensions by the seller on behalf of their lender. After these experiences, I became disinterested in pursuing short sale opportunities because it just wasn’t worth it. Nobody came out of the process unscathed and, as a friend said years ago, “Jeff, I don’t need any more practice – I need to get paid!”. But the sale I closed today (my 54th completed sale already in 2012) was definitely different!
My friend who I go to church with approached me around the beginning of March and told me that, due to a number of unfortunate events, he needed to sell but owed considerably more than his house is now worth. This is not unusual in this era. In fact, a large percentage of all home owners are now “underwater” – Especially if they bought during the 2003-2007 “bubble” years.
When we met, I explained that the only possible solution was a short sale and warned that this was a challenging process that often takes months (if ever) to succeed. Despite my warning, my friend had no other option and we listed his lovely Sevierville residence on March 5th for $110,000 (a little over half of what it appraised for in 2007). We used the very attractive price to generate lots of interest which is an absolute must. To qualify for a short sale, the seller has to be in arrears on the mortgage so there is a ticking time bomb in the impending foreclosure that will occur at some point. With multiple offers, my seller accepted the offer of the buyers (that I also represented) and on March 14th we had a pending sale at a price of $115,000.
I then proceeded to explain to all parties that the easy part of a short sale is putting the property under contract but the hard part was getting to the closing and that the process could take many months. In fact, I got a really sour taste from a Bank of America short sale that I worked a few years ago which went on for NINE MONTHS until the seller was foreclosed upon negating all our hard work. As someone who lists a lot of foreclosure properties, I see all too often that there was a short sale pending on the property that the bank has just assigned to me because the foreclosure has been completed. We then hunkered down for the anticipated misery of a long and painful process but it didn’t take long to learn that this short sale would be different.
Within days after submitting the complete package to Fifth Third Bank for their approval, we were contacted and told that a Broker Price Opinion had been ordered and that the file was in review. Additional information was requested by Fifth Third and my confidence waned somewhat – This was starting to look a little like the route I have travelled with other lenders before when pursuing a Smoky Mountain short sale. On April 13th however, less than a month after we had submitted the executed contract, Fifth Third advised us that the short sale was APPROVED!! The buyers then went to work in earnest to obtain their loan from Smart Bank, a Sevier County local bank that did a great job of quickly getting their package together and we closed TODAY!
Less than 60 days from listing to closing on a short sale is an experience I didn’t believe could actually happen. With this success, I am no longer allergic to short sale transactions if the right components are present. For the hope of a prompt short sale, these ingredients are required:
- A legitimate hardship that can be proven with regard to the Seller’s ability to service the debt.
- A contract sales price that is in line with current market realities.
- Complete paperwork submitted promptly by all parties.
- An organized and realistic Seller’s lender.