Making the Bank Accept Your Short Sale Offer
Tips for Negotiating the Short Sale
There is one true fact about negotiating a short sale. Even if you're a successful short sale agent who has negotiated hundreds of short sales over the years, you will agree with me on this one true fact. When you think you know everything there is know about a short sale, the rules will change. That's because there are few real rules. Except for HAFA. And those are loosely interpreted.
Even with a ton of knowledge, short sale agents still receive unsolicited advice from those who are trying to help.
One of my favorite suggestions is:
Why Don't You Show the Bank How Much Money It Will Lose If This Homes Goes to Foreclosure?
I guess this helpful idea is supposed to be conveyed via twenty-seven 8 x 10 color glossy pictures with circles and arrows and a paragraph on the back of each one. See, the thing is banks in the business of lending money tend to hire employees who know how to work a calculator. Bank negotiators do not need a lesson in Finances 101, regardless of what an outsider might think.
If a bank is considering a short sale offer, the bank has already done the math. The bank has already looked at its PSA and determined whether it makes more money from foreclosure or a short sale. Most banks are corporations. The goals of a corporation are to grow, get bigger and make more money.
Short sale agents can show the bank the direction their local markets are moving. If home values are falling, it might make sense to accept an offer this month over next year, for example.
But for the most part, banks are not interested in the opinion of a local real estate agent. Their negotiators are not looking down the road at the future. They are looking at what they can do today. Today, they will approve or reject your short sale or else go on vacation.
How to Help the Bank to Accept Your Short Sale Offer
If you are really serious about helping the bank to accept the short sale offer, then you will learn to give the bank what it wants.
It is not fruitful to argue with the bank, even if the bank is wrong. If the bank tells you the sky is purple, then you say yes, the sky is purple. Do not argue about the scattering of high frequency light. You will lose. Here are more tips:
- Return documents promptly.
Your agent might send you a document that you will have sworn you had already signed. Forms such as an arm's length affidavit, short sale listing addendum or short sale contract addendum are constantly being tweaked and changed by bank's lawyers. The version you signed previously might be outdated by the time you are close to short sale approval.
If the bank wants an updated bank statement or payroll stub, immediately stop what you are doing and send that document to your agent or loss mitigator. If you do not show urgency to the bank by quickly responding to its requests, the bank's negotiator might take his or her sweet time to pick up the file again. Many tasks have deadlines. If your agent misses a deadline, the file could be closed.
- Send complete documents.
Send every page of that tax return, every page of that bank statement. Don't make the mistake of thinking the bank prefers the shortened version. It wants every page. Make sure your loan number is on every page.
On HUDs, your agent should know that banks generally want to see both the seller's and the buyer's names. Sometimes banks want to see the junior lienholder's names spelled out as well. If the HUD contains credits from the seller to the buyer that are not really credits, I always make sure the buyer's side of the HUD is completed. Even if the numbers are fabricated on the estimate. Because negotiators often do not understand why a seller credit is a buyer's debit on the HUD unless they can see it in black-and-white.
- Send a CMA to justify price.
Don't lowball, send a reasonable and fair, close-to-market value offer. Sometimes, banks will tell you they want a higher sales price based on the BPO. That could mean the bank does not want to do your short sale because it will make more money through foreclosure, and it just doesn't want to tell you that. Or, it could mean the BPO agent is incompetent. You do not know which. So, ask your agent to send the CMA.
- Give the bank the buyer's documentation.
Show the bank the buyer is strong and committed. Agents can do this by providing a copy of the buyer's earnest money deposit. In addition, send a preapproval letter, dated and signed by the buyer's lender within the past 30 days on color letterhead, no less. Include a bank statement as proof of funds.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.