Agents & Buyers: These are the guidelines that we follow to do a successful short sale.

First, only 2% of the agents in real estate have any short sale training. Rhonda Duffy is the ONLY Elite certified CDRS short sale specialist. Second, only about 25% of short sales actually close. But in the case where a buyer is successful they report that they feel great about the purchase.

A short sale is when the seller is asking the lender to allow them to sell the property without paying the full amount owed the lender. Some sellers have 2 loans on the property so the seller will be asking both lenders. Sellers have to show a hardship and show that they do not have the assets to pay for the home any longer. The lender is expecting the seller to be broke at the time of the short sale. The paperwork that a seller has to submit to the bank is very intense. Some sellers fail to do this properly. The offer can not be submitted without a hardship letter and the correct paperwork.

It takes almost 3 months to get all the pieces in place to get an approval from the lender(s). Once the package is put together, it is uploaded to the bank by the listing agent. After about 5 weeks, the listing agent is contacted (often for the first time) by the lender(s) to verify that everyone is still in place ready to sell and buy. The lender will then order the appraisal to check the value of the property and to make sure that the listing agent has properly listed the property. Then, they start negotiating with the seller to get a cash contribution or promissory note from the seller and the seller decides what to do next.

Lenders use the following calculations to determine what they are willing to take. It is very rare for them to stray from these calculations. Because of these calculations, short sale offers should be very close to the fair market value.

15% of Fair Market Value determined by appraisal + 6% commission + any taxes, HOA fees, liens etc… So the home is sold at 92% +/- of fair market value.

Closing costs rules: The rules are based on the type of first mortgage that is being shorted and the type of loan the buyer is getting. If you need a lot of closing costs, a short sale is not for you.

Seller Loan Type:

Conventional – the lender will pay up to 3% with a fair market value offer
VA - the lender will pay up to 3% with a fair market value offer
FHA – up to 1% IF you are getting an FHA loan the lender will pay 0 closing costs if the buyer is getting a VA or Conventional loan

The listing agent should know what type loan the seller has.

Repairs: Lenders expect the seller to be broke at the time of closing thus the seller can not make any repairs. Lenders do not make repairs. You are buying the house “as-is”. You can do an inspection, which is recommended. If you don’t have the money to make repairs, a short sale is not for you.

Termite Letters: Lenders do not pay for termite letters.

Home Warranties: Lenders do not allow home warranties to be paid by the seller. Remember that the seller needs to have no additional concessions per lender requirements.

Close Date: Close dates need to be at least 90 to 120 to 150 days from the time of offer. If you need to close quickly, a short sale is not for you.