Short Sales Part IV
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2009, Volume 8, Number 1
Stewart Title Continues to Grow Market Share in Massachusetts
by Craig J. Celli, Massachusetts State Manager
Handling the Client
The first and most important step in a successful transaction is to gain your client’s trust. You must extract accurate and vital information.
Your client likely will feel embarrassed about their situation. Be understanding and let them know that everyone goes through bad times occasionally. Tell them you are there to help and that you can only do your best job if they disclose all material facts to you. In addition, they need to know that the closing attorney will need all the information as well so they will be able to prepare the most accurate estimated closing statement possible.
Extract the necessary information.
- Full disclosure about how delinquent their payments have become and whether or not they are in foreclosure.
- Full disclosure about how delinquent their property taxes are.
- Do they have an escrow account with their lender?
- Are there liens and judgments that may attach to the property, including child support, creditor judgments, lawsuits, IRS and FTB liens?
- Are there possible additional ownership interests in the property (unrecorded deeds or possible spousal interest)?
- Are they presently in bankruptcy or do they plan to file bankruptcy in the immediate future?
Gathering Required Documentation
There is a long, but manageable, list of documents that must be compiled before a lender will consider the case.
- Hardship letter
- Completed financial statement
- Documents proving hardship
- IRS tax returns for last two years
- Pay stubs for last two months
- Bank statements for past four months
- Listing agreement
- Purchase offer
Preliminary title report
- HUD-1 settlement statement or preliminary statement
- Written notice from all junior lien holders
Approaching the Lender
- Be timely. If you are fortunate enough to work with a willing lender, make sure you submit the information before they forget they have talked to you. That is, if you talk to them on a Monday, have the information in their hands by Friday.
- Ask the terms. Different people with varying personalities and policies will prefer the information to be submitted in different ways. Once you have collected all the information, call the lender and ask how they would like to proceed. Offer to meet with the bank officer handling the matter, and also offer to submit the package by mail. Make it clear that you are willing to work on their terms.
- Be patient. It normally takes a lender 10 to 30 days to accept or reject a short sale offer. If you have not heard from the lender in 15 days, leave a gentle reminder by voice mail.
- Be available. It is entirely possible that, even with all your hard work, you will have missed some small part of the equation. Make sure your contact has your full and complete contact information, and that you answer all phone calls during the evaluation period.
- Have a game plan! If the lender agrees to the short sale, they typically give you between 30 and 45 days to completely close the transaction. After this period, the lender’s offer will be withdrawn. Make sure you are fully prepared for the offer to be accepted. In the case of short sale, you will often be working with the buyer/investor throughout the entire process. If you have a buyer at the beginning, make sure the details of the transaction are agreed upon by all parties before you ever approach the lender. Do not wait until this stage to aggressively seek a buyer. You should always have a buyer secured before the paperwork is submitted to the lender.