Training for Short Sales & Mortgage Loss Mitigation to Stop Foreclosure

Time For Short Sale Approval

March 12, 2009 by  
Filed under Short Sale How To

time-70One of the biggest problems is the time it takes for the lender to review the short sale package. At the national conventions, the lenders on short sale panels talk about wanting to get close to the market value of a home in a short sale. To get close to a retail value, you have to sell to a retail buyer, not an investor. If the time to review a short sale proposal is measured in months, you will not get a retail buyer, as they are looking for a home that they need to move into in a reasonable time. The only buyers who will endure a long delay are the ones who are willing to trade the inconvenience for an amazing price i.e. an investor who does not care when you close. In other words, if you want to sell retail, you have to deliver the property in a retail time frame.

An example lets you see what the delay does to a family who wants a home. I submitted a short sale for $620,000 to Countrywide in May, 2008 on a property in Rancho Palos Verdes, California. They turned it down late in July, with no counter ofer, just a rejection. Two days later, the same buyer increased his offer to $630,ooo and I submitted it with a transmittal in huge bold letters identifying it as a response on an open short sale file. We did not get a response from Countrywide until November, 2008.

When the offer was submitted, the lady of the buying couple was seven months pregnant. They were hoping to get this home just down the street from where her parents lived. During the time for the initial review, their child was born. During the second review, the child was developing rapidly. When Countrywide responded by saying they wanted $635,000, the market had fallen so much that a bigger house with a better yard and a much better view came on the market for less money than Countrywide wanted for this house that needed repairs. So, the couple and their young child moved into that other house.

As you can see, the delay not only chases away family buyers, it makes it harder for the Realtors to convince the buyer to honor a contract price that was reasonable six months ago after the market has fallen.

So, what do you do? Some instructors say to submit the financial information for the seller early, so that part of the review can be completed before an offer comes in. That might help, but many lenders will not review anything until you have an offer. When the lender has too many files to review to begin with, they are going to review the ones with offers first and they may never get to one without an offer.

So, get an offer as fast as possible. If you have an investor who will buy the house at an amazingly low price, write it up, include the short sale addendum, have the seller sign it and submit it. If no other offers come along, see what the bank says in response to the offer. If they accept it, close the sale and your investor gets a good deal. If they give you a counter offer, you will know what the lender will accept even if your investor will not go that high. Once you have an approved amount for the short sale, you can adjust your list price accordingly to get a retail buyer who will accept it as you can tell them the process will be shorter than normal.

Another possibility is that a better offer may come along while you are waiting for the review of your investor’s offer. If it does, make sure that your file has been assigned to a short sale negotiator before you submit the other offer. If you submit a series of offers, the lender may start the process over with each submission, so you are moving to the back of the line each time you submit. You have to submit all offers to the seller promptly under the National Association of Realtor’s Code of Ethics. You do need to submit it to the lender at some time, but there is no requirement for urgency.

Some seminar leaders say to submit a fictitious offer, just to get the process going. If the bank accepts it, their advice is to say that the buyer walked away. I won’t do this as my credibility is extremely important.

One of the ways to speed up the process is to have a complete short sale package organized so that it is easy to reveiw. The short sale package has been discussed in a separate post, but the most important point on expediting the review is to find out what the lender wants and give them everything they want the first time.

Another part of expediting the process is to call regularly. I call at least once a week, and sometimes three times a week. You need to check the notes in the file to see where your package is. Occasionally, it is submitted to the wrong department, like the time ASC submitted my clearly labeled short sale package to the loan modification department. That department threw it away. Other times, you need to be sure that your package is moving toward assignment to a short sale negotiator. Most of the time in the review is waiting to be assigned, so if you can shorten that, it will help. The worst thing is if you are assigned to one negotiator, who does not get to your package, then they reassign it to another, who does not get to it, then it is assigned to another. You get the pattern. My record is being assigned to six different negotiators before one actually looked at it.

As a part of calling regularly, you may get acquainted with some of the supervisors in the department. See if you can submit the package directly to them for an expedited review. Usually the answer is no, but sometimes it works.

Another delay in the process is getting the appraisal or broker price opinion (BPO) done. Some lenders have a triage arrangement to review short sales. The ones that have no merit are rejected with little review. Others that may be considered go on to be assigned to negotiators. See if you can convince the triage people in the loss mitigation department to order the appraisal or BPO while the file is waiting to be assigned to a negotiator. If the person you are talking to does not have authority to order the BPO, ask to talk to a supervisor, or someone with the power to do that.

If the process is taking too long, find out if the loan has mortgage insurance or any other guarantor. One of the conditions of the loan guarantee is that the servicing lender will have a loss mitigation procedure that will promptly review short sales. Google the name of the mortgage insurance company and explain to them your issue with the delay. When the guarantor gets in touch with the lender who is reviewing the short sale to discuss how the delay may result in the cancellatioin of the guarantee, the process will speed up dramatically. You can also do this with the actual investor who owns the loan. If they hear that the delay is jeopardizing the ability to get the short sale approved, their contact with the company reviewing the loan will speed up the process.

One thing to remember during all this time, be nice. I have a strong temper and it is hard for me to deal with an incompetent system. But, getting angry with the people in the loss mitigation department is extremely damaging. They are the ones who will be making the recommendation to accept or reject your proposal. Bite you lip and be pleasant.

When you take a short sale listing, contact the loss mitigation department and find out what their normal time for review is. They will quote you something that you can pass along to the buyers to set their expectations at a reasonable level. If the buyer expects a long time for review, and it comes in anywhere near that time, you will have met their expectations. One dilemma is that sometimes the review times quoted are way longer than what it will really take. If the quote is incredibly long, it may make the buyer run away screaming. So, you have the dilemma of whether to pass on the outrageous quote or not.

Doing short sales will teach you patience, and perserverance.

Comments

3 Responses to “Time For Short Sale Approval”
  1. mark says:

    I rarely comment on blogs but yours I had to stop and say Great Blog!!

  2. Anne says:

    I am currently going through a short sale. We got a fair offer for the property and submitted all the paperwork to the two banks that I have loans with. The first bank approved the short sale right away but the second bank was dragging their feet. It was impossible to get in touch with the ‘negotiator’. We were coming down to the wire and the buyer didn’t want to give us any more extensions. I really didn’t want to lose the property to a foreclosure since a short sale is better for my credit than a foreclosure.

    Someone suggested that I contact my local Congressman’s office for help. I called them on a Monday afternoon. That same day they faxed me a privacy release which I sent back right away. They contacted my second lien holder Tuesday morning and by Tuesday at 5pm we had our answer.

    My advice — if you are the seller in a short sale situation and you are stuck waiting for the bank’s approval — contact your local Congressman’s office and have them help!

    Because of that one phone call my short sale is now approved by both banks and it only took about 30 days for everything to go through.

    Short sales don’t have to be a nightmare if you are organized from the start and know who to call when you need help!

    • Tim Burrell says:

      It is all about negotiating ability, isn’t it? Good work. Other techniques that work are to escalate your discussion to the supervisors, then go around the servicer to the investor. If there is a guarantor of the loan, discuss the situation with them. Anyone that the loss mitigation department has to answer to will improve your review. time. Great work on your part, and thank you for adding to the wisdom of the group with your technique.

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