Negotiating a successful short sale not only takes a thorough understanding of the short sale process, but also a keen attention to detail to manage the different steps involved. As soon as you send in the Letter of Authorization (LOA) to establish your relationship with the bank on the homeowner’s behalf, you should take swift action on the following steps to prepare for negotiations with the lender:
- Request a title report from the title company. The title report will list all of the liens and encumbrances related to the house.
- Determine whether there are any back property taxes and calculate current year property taxes by checking with the county tax assessor.
- Determine whether there are any Homeowner’s Association (HOA) transfer fees, certificate fees, past due amounts, and past due penalties by calling the HOA. (Some of these items can be determined through a title search by your title company, but the title company will not be able to see whether there are past due HOA fees where no lien has been filed.)
You will need to include all of the above information on the HUD-1, or Net Sheet, in the short sale package. It is up to the short sale agent to gather accurate information regarding any of the above obligations to determine what the bank will net. The bank will consider this information together with the Broker’s Price Opinion (BPO) to make its determination on the home’s value and an acceptable short sale price.
Once you have gathered all of the above information, you can compile the short sale package with the preliminary HUD-1. If you know how to create the Net Sheet yourself, be sure to do your due diligence to determine all of your costs. Estimate your costs on the high side, so if there is any mistake, you’re not trying to negotiate up. Also check the lender’s website to see what other documents need to be included in the package, since each lender has its own set of requirements.
Finally, you will need to know what fees the lender being shorted will pay, which you can determine by talking to the lender. Most lenders will not pay attorney fees or document preparation fees; however, most title companies will want to charge those fees. You will need to determine how those fees will be covered, either by negotiating with the title company or the buyer, or paying them yourself. The shorted bank is not going to pay them.
As a short sale agent, you want to start the negotiation process right away. Send in the LOA and initial short sale package to the bank as soon as possible, even if you don’t yet have an offer. This gets you in the queue with the bank, and depending on the investor behind the lender, you may be able to start the short sale negotiation without an offer from a buyer.
If you would like more information about the short sale process or need assistance negotiating a short sale, please contact our office at 972-342-0011. We will be happy to assist you.