You should have been made aware immediately that there were 2 lenders, basic information. That said, as long as there is an attorney involved you shouldn't worry too much about it.
Short sales can take anywhere from 60 days to 6 months+! They are not for everyone, especially if you are on a deadline, i.e. a move out date.
It seems like it's moving in the right direction. Patience is the key word.
If the seller hired a so-called short-sale "negotiator," you may be in for a long wait. Such negotiators are completely unnecessary, and many banks won't even speak with them. If they are charging the borrower a fee, they may be breaking the law. Also, they may be holding up the sale if they're trying to get paid by one of the lenders, who may refuse to pay them.
Short sales usually move in the following manner:
1. The homeowner contacts the primary (first mortgage) lender to inquire about a short sale.
2. The bank requests information about the homeowner's finances, to prove hardship and qualify the homeowner for a short sale.
3. The homeowner provides the proof of financial hardship to the bank. E.g. tax returns, current pay stubs, bank statements, letter of explanation of the hardship (loss of income, medical bills, etc.).
4. The bank assigns a manager to the homeowner's file and communicates with the homeowner (or the homeowner's real estate agent) to coordinate documentation and the sale process.
Note that at step 4 we haven't yet listed the property for sale. Nonetheless, these first few steps are some of the most important. Continuing the process:
5. The bank approves the hardship application and directs the homeowner to list the property for sale with a real estate broker.
6. The homeowner works with the broker to determine the predicted sale price for the property by analyzing comparable recent sales.
7. The broker offers the property and encourages interested parties to make an offer.
8. The seller signs a bone fide offer with a contingency of short sale approval. The broker forwards the contract for sale and supporting documentation (e.g. buyer's proof of funds, pre-approval for mortgage loan) to the bank short sale manager.
So far, the process is much like a regular sale, aside from the hardship requirement. This should take about a month's time, with proper pricing and marketing. After receiving an offer, though, the buyer and seller can be frustrated with the pace of events.
9. The bank sends out an independent broker to obtain a "Broker's Price Opinion" or BPO. This analysis should come back with more or less the same amount as the bone fide offer from the buyer.
10. The bank sends the seller (or seller's broker) a breakdown of what closing costs it will pay for and what ones it won't. It also will require that the broker (or seller's attorney) estimate these costs, so that it can determine what amount it will recover after the sale closes. This estimate includes a provision for compensation to the second mortgage holder.
11. Now comes the hard part ... the negotiation with the second lender, who has a subordinate lien from a home equity loan or line of credit. Typically the first mortgage holder will propose an amount to the second mortgage holder as a payoff. The first mortgage bank's manager typically proposes this amount and negotiates it with the second mortgage holder. Why? because the first mortgage holder has priority in the order of liens.
12. If the second mortgage holder does not agree to the payoff amount (which usually amounts to between one and ten percent of what they are owed), the first mortgage holder will return to the broker with a counter offer to try to cover the higher expectations of the second mortgage holder while still preserving some return for the first mortgage holder.
It's exactly at step 12 where things can go awry and a short sale can turn into a foreclosure. A few years ago, this was often the case, as the second lien holders were loathe to negotiate a settlement. More recently, both first and second mortgage holders have become more realistic and willing to negotiate.
13. Once all lenders have agreed to the terms of the sale and payoff amounts, the attorneys can schedule a closing. If they've been doing their job by getting a title commitment going and making sure that the buyer has obtained a mortgage commitment (if necessary), closing should happen within two to four weeks.
A word of caution: once the banks approve the short sale, by no means change the date of closing, unless the banks request it for some reason. Changing the closing date will change the return on the settlement amounts, which will require approval all over again, setting the clock back potentially by several weeks.
Please note who is in the center of all of this process: a REALTOR. The real estate brokers for the buyer and seller are the most important persons in the short sale process. Make sure you work with one who knows what they're doing.
There are many brokers who claim to be "Short Sale Experts." Work with one who has a certification or references to prove they know what they're doing.
Don Pasek, CIPS, TRC, ADPR
Omniterra Real Properties
It is moving in the right direction. From your post, things seem to be moving as they should. The investor owns the note and the bank is servicing. The banks are using third party negotiator just like a seller would to handle negotiations in which all parties work off of an Equator system.
Sohail A. Salahuddin | Founder and Team Leader
Innovative Property Consultants Group | Sales and Leasing
Jameson Sothebyâ€™s International Realty
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