Short Sale Process

For most homeowners, a short sale is something they never thought they would go through, and so they aren’t familiar with the process.  The same can be said for most buyers; even buyers who have bought many homes in their lives have probably never gone through the short sale process.

There is really nothing “short” about a short sale.  I’ve heard many buyers refer to them as “quick” sales, but they are mistaken about what a short sale really is.  The easy definition is this:

A short sale is a real estate sale in which the net proceeds of the transaction are not enough to pay off all the liens on the property.

In most cases, the short sale can’t even begin until there is an offer on the property.  At that point, the offer is sent in to the seller’s bank.  But the offer doesn’t go in alone…it is part of the “short sale package.”  The package will include the seller’s financial documents (tax returns, bank statements, etc.) and a hardship letter.  In response to the offer, the bank will usually order an appraisal or a BPO (broker price opinion).  This is to help the bank determine if the offer is reasonable based on approximate market value.  Once a price is agreed upon, the offer may still need approval from the bank’s investor (the person or entity that bought the note) or the mortgage insurance company.  All of these steps take time, which is why short sale buyers often “walk” from the deal and find other retail-ready properties than can close more quickly.