What are the rules for short sales? Trying to buy a townhouse in Apple Valley but don't hear back from bank.

Asked by Geri, Apple Valley, MN Wed Jan 21, 2009

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Gail Strom, Agent, Apple Valley, MN
Thu Jan 2, 2014
Hi Geri,

You're question is quite old but for anybody else considering a short sale, there are no rules! Well, the banks do have guidelines and requirements for accepting short sales but there are several pieces of the puzzle and they vary with every bank, individual working at the bank, and every seller situation. Make sure you hire somebody who doesn't do a few here and there but who has a strong history with getting short sales done- period. We use attorneys and full time negotiators to get the results for our sellers.

Gail Strom
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Tim Little, Agent, Apple Valley, MN
Fri Sep 11, 2009
Hi Geri,

My name is Tim and I sell real estate for Coldwell Banker Burnet out of our Apple Valley, MN office. Hopefully you are working with an agent that has explained to you to be very patient when purchasing a Short Sale or Foreclosed home. The professionals at the banks have a stack of files on their desk when they get in the morning and most likely a higher stack of files when they go home at night. Their responsibility at the bank is to go through all these short sales and foreclosed files as fast and accurately as they can. Their job, which I do not envy in any way is to make sure all the files are complete, a broker price opinion of the property has been completed and the bank is well informed of the situation if it is not within the bank's financial margins. So all of this takes time and the professional working on the file, to them it is just another file to them and they need to follow all the banking regulations that are in place. My advice is if you have an offer in on a short sale or foreclosure property is patience with your agent, the listing agent and the bank.
Best regards - Tim Little
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Susan Hoffla…, Agent, Shoreview, MN
Wed Jan 21, 2009
Geri, short sales have no rules. I have had short sale offers that take over 3 months to get a response and have had a full price offer be rejected because, most likely, the bank is just waiting to foreclose. I find the pretense that they may take a short sale offer to be a waste of everyone's time. I know there is an agent here that thinks 3 months on a short sale can't happen, but I'm here to tell you it can and does. We all agree that you as the buyer need to be patient and be prepared to sit and wait for them to get to you, if at all. If you are uncomfortable with that, you should consider moving on to another type of property where there is more certainty on response time and such. Good luck!
Web Reference:  http://www.homestosellmn.com
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Deborah Madey, Agent, Brick, NJ
Wed Jan 21, 2009
Banks do not have to follow rules for short sales. Banks are being asked to accept an amount less than the amount due on a loan, and accept it as payment in full. While it might be the best business decision a bank can make, in a given circumstance, the lender has no obligation to respond at all, let alone within a prescribed time frame.

A well prepared hardship package presented with complete documentation increases the likelihood of approval, but does not guarantee it. Banks can deliver a response in a week, or not even acknowledge an offer for several months.

A buyer agent can ask the listing agent if a hardship package has been submitted, if the lender has sent out for a BPO, if the hardship package submitted was complete, if the bank had any feedback, if there have been any offers submitted, if a negotiator has been assigned, and if that listing agent has ever worked with other shorts sales before.

If both the listing agent and buyer agent are experienced and diligent, it increases the likelihood of a successful transaction. Still, the banks have no obligation, so there are no guarantees.
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Jennifer Kir…, Agent, Minneapolis, MN
Wed Jan 21, 2009
I have to add, I do not agree with Rene. I have never had a short sale take three months. A month at the most is much more common, but I have seen offers accepted within days of submittal...it all depends on the bank. Also, do not pressure the listing agent. It is beyond their control, and harrassing the short sale agent will only make them mad, and they could delay responding to you (the bank agent that is). I have been both on both sides, representing the seller doing a short sale, and also working with buyers. It has really helped me understand that the only thing you can do is have patience. If a buyer cannot do that, then they should consider not looking at short sales or foreclosures.
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Jennifer Kir…, Agent, Minneapolis, MN
Wed Jan 21, 2009
Hi Geri,

Sadly, there are no rules for short sales, as each bank has their own set of guidelines on how they handle them. Two things happen in short sales: either the bank prenegotiates the price they will accept with the seller, or the bank will not even consider a short sale until the seller gets an offer.

If the later, the offer comes in and both parties sign the purchase agreement. Next, the listing agent submits the offer, an estimation of seller expenses or HUD doc, the listing agreement, and all other documents required by the bank, like seller hardship letter, bank statements, tax returns, etc. Once these are submitted, a short sale agent is assigned to the file. They then go through all the documents, request anything more, request a BPO (brokers price opinion), and send it to the appropriate people for either acceptance or denial. Then, a hold other round of negotiations can begin. This process could take weeks.

However some banks accept the seller's hardship letter and financial documents before any offer comes in. They order a BPO and decide what they are willing to accept from a buyer. This is called a prenegotiated short sale. Once the offer comes in, the listing agent sends in the offer, listing agreement, etc and then the short sale agent who has already been assigned to the file, looks over the docs to see if they meet the terms already laid out, and you could have acceptance within a few days.

These are the two instances I have encountered. Some bank agents are nice and some are down right rude, taking their time with each file that comes in. Banks right now have so many files coming in that it takes a while, so hang in there. Hope this helps you understand the process a little.
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RENE LABRADO, , Fountain Valley, CA
Wed Jan 21, 2009
Youre agent should keep you informed on what the listing agent has said. Usually in short sales, it takes up to 3 months to hear an answer from the bank. But it also depends on the listing agent of the short sale, sometimes the listing agents dont know how to handle a short sale and it ends up going in foreclosure and wasting your time. Tell your agent to push the listing agent, pushing the listing agent will make him be in constant contact with the bank. Most of the time properties will have several offers so you should check if your offer is the highest because the bank is going to take the highest and best offer.

Rene Labrado
Century 21 Beachside
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