To get a loan registered withe bank as a short sale, the homeowner must fill out what's called a "work out package" which includes a hardship letter and complete financial documentation proving that the seller has no assets and cannot cover the loss. Once this is done, then the home is a short sale transaction and the homeowner can accept an offer from a buyer and send that offer to the bank to see if the bank will accept the offer so that the house can close.
Think of it this way - the bank enables the homeowner to sell you the house by agreeing to absorb the loss. A short sale is really a sale of a home that is contingent upon a bank agreeing to take the loss.
Now, you have your offer signec by the homeowner so you have a contract to buy the house. Assuming that the loan is registered as a short sale, then your offer together with whatever documentation is required by the bank should have been sent to the bank for the bank's OK. Every short sale contract that is sent to the bank MUST have a preliminary HUD statement. If they did not do that, you have no hope of getting the house. While each bank has it's own unique system, sending an offer with a preliminary HUD is standard proceedure. This is because it allows the bank to evaluate the offer in terms of what it will net.
It can indeed take 6-9 months to get an answer. Banks are overwhelmed - each individual handling short sale files in a bank has literally hundreds of files at one time.
Here's another important item to check on - how many loans are there and are the loans with the same bank or different banks? If you have more than 1 loan and it's with more than 1 bank, that will take longer as after one bank approves it, the other has to as well. Sometimes the first position says yes and the second says no. It happens all the time.
You have a right to know who is negotiating with the bank. Your attorney can ask the seller's attorney for this information if need be but your broker should be able to get this from the seller's broker. A bank will talk to one person. The homeowner has to give the bank written permission to talk to that person and it can be the homeowner's broker or attorney. Whoever it is, however, should make sure that they are on top of this.
What you're describing does not sound like things have been handled correctly - you need to know immediately if the short sale has been registered because it sounds like this hasn't happened yet . I think that you need to consult with your attorney and have your attorney ask the seller's attorney for the specific status of this thing. Again, what you're describing above is very odd because the package is supposed to be sent to the bank complete. What happens during the process is that the bank can ask the homeowner to update the workout package - that just means to send more current pay stubs, copies of financial statements, etc. to verify that the homeowner's status hasn't changed.
With short sales, you have to be patient but you should also look at other properties. Again, it's best that you consult with your attorney so that you understand things correctly. I am assuming that your contract has an "escape clause" for you so that you can get out of this situation unscathed should you wish to do so. What I can tell you is that despite the long wait, short sales normally represent sales prices that are below market and so they are a great value. While you're waiting, keep looking at homes because you never know if something better comes around.
Have the following documents been submitted to the bank, from the seller & listing agent
Sellers Hardship Letter
3 Months Bank Statements
A Current Market Analysis for the property (BPO)
Authorization letter for the agent.
Copy of the listing agreement.
After this it is the listing agents responsibility to call the bank one time per week.
Two Important things to know
Did your agent write a clause into the contract that the seller agreed to accept and submit only your offer?
Is there one lien or two? (This takes longer) The banks need to negotiate this out.
There are other factors but these are the basics.
Banks are not in the business to own property they want to move them. So just hold on and I am sure you will get a great deal.
Dawn Marie White
Broker-Manager-Sales Professional Crossroads Realty Inc
During the process the bank needs a short sale package and they need all the information at once and that includes 2 years of income taxes, paystubs, harship letter expense sheets, bank recent bank statements etc. Sometimes this information needs to be current in order to be accepted and needs to be updated.
Everyone needs to work with this together and answer back from the bank. You can really not do anything but wait now. Find out who is responsible to be the negotiator for for the Seller sometimes paperwork is submitted and no one follows up and the bank does not always call back for more information they just close the file and proceed with forclosure. Good luck and be patient these deals are good when they finally close. Seller has no money so it will be hard to get them to do anything at all. Good luck!!
This is how short sales work. You have to be prepared to wait and wait and wait, all the while knowing that your contract can be thrown away at any point. I'd keep looking at other homes, and if the short sale works out it's good luck. In a falling market your bargain short sale will be at market value by the time it closes!
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