How to prepare for a short sale

How to get yourself and your property ready for a short sale.

(Part 3) Things to do, what you should know and expect to prepare for short sales as a seller:

Also read: Part 1 and 2. "Sellers and Short sale real estate" and "What real estate brokers think about Short Sales."

Also read: Short sale frustrations

You may want to consider asking the bank if they will consider a Deed in Lieu of Foreclosure without recourse. This can be done and may be much easier than the brain damage of a short sale and foreclosure. Make sure you get it in writing and that is states they will not come after you for the difference after you give them the deed.

First let me say to sellers that there may be other options for you outside of trying frantically to sell your home in a short sale situation.

Try to hire a REALTOR that uses a professional short sale negotiating company to assit in the process. This will usually cost you a small amount of money up front but most REALTORS don't have the time, contacts and especially the staff necessary to complete a short sale transaction no matter what they may tell you in the listing appointment.

Many banks will not even start the process unless you are already behind on payments and unless you have a contract from a buyer to give them.

Before you ever think about selling a property as a short sale you better make calls to your lender and see if they will even consider doing a short sale on your current loan or loans. Please remember that just because they say they will consider it doesn't mean it's going to happen. Oh and if you have a first and a second loan from two different banks make sure to call and get approval from both lenders. Usually the second loan which is subordinate to the first is the one that will kill a deal.

Every time you talk to someone at the bank take their name and try to get a DIRECT phone number and Email if possible. (your REALTOR will want and need these contacts and numbers) Keep track of these people and keep tedious notes on each and every conversation. Don't be surprised if it takes in excess of 1 hour to reach the proper department and then another hour to reach the correct person. Make sure to get fax numbers or email addresses for where they want your information sent to.

The lender will want to know how far you are behind on the payments.

They will ask for a detailed financial statement of your current bank accounts and credit accounts. Be prepared and have this information up-to-date and ready to be sent out several times to the loss mitigation rep you speak with.

Have a signed "Broker Authorization" form with your loan numbers and social security number or numbers ready to fax into the lender. They need this in order to be allowed to communicate to your real estate broker or short sale negotiator about your situation.

The bank will order a BPO (broker price opinion) like an appraisal to determine the market value of your property.

Be prepared for an emotional rollercoaster.

Unfortunately in every deal I was a part of during 2008 the bank basically pushed us to the back burner until we were within a few weeks or even days before the foreclosure sale date before they really looked at the buyer's contract we submitted to them. I actually had one deal that was submitted 8 months before we finally got it closed. We closed it within a week of the foreclosure sale date.

There is still hope if you are nearing the foreclosure sale date. If you receive a good solid offer a week before or even days before the foreclosure sales date the bank can postpone the sale date if they like the offer.

Things to watch for when listing your home for sale as a Short Sale:

Be careful of Realtors that list your house for sale before ever talking to your bank first.

Be careful of trying to list your house at an unrealistically low sales price. Banks usually have a percentage of the amount owed to them that they will accept. So just because you price your house lower than any house in the neighborhood and get an offer don't assume they will accept it. Doing this can actually cost you a lot of wasted time and HOPE.