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TABLE OF CONTENTS
Introduction
The following "Short Sale Procedures" will guide you through the entire process - from the first meeting with a prospect, to the close of escrow.
Short Sale Checklist
With Each New Short Sale Prospect:
Prior to First Client Meeting:
Prepare Short Sale Presentation Package:
- Short Sale Checklist
- Short Sale Information Form
- Short Sale Presentation
- Mortgage Forgiveness Debt Relief Act of 2007 - Handout
- Documentation Requirements for Short Sales - Handout
- Hardship Letter Sample - Handout
- Personal Financial Statement - Handout
- CMA (Comparative Market Analysis, showing Active, Pending and Sold for last 3-6 months)
Prepare Real Estate Contract Package:
- Real Estate Agency Relationship Disclosure (AD)
- Standard Residential Listing Agreement (RLA)
- Under page 1, item 3B, write “Short sale and gross commission subject to lender approval.”
- Short Sale Listing Addendum (SSL)
- Seller's Advisory (SA)
- Authorization to Receive and Convey Information (form ARC) (Place each lender and account number on the ARC form)
Prepare Real Estate Seller Disclosures Package:
- Natural Hazard Report (TC to order from natural hazard disclosure company when escrow opens)
- Environmental Hazards / Earthquake Booklet
- Real Estate Transfer Disclosure Statement (Form TDS)
- The Seller’s agent should check the 1st box of the middle of the page, and write “Agent is not a property inspector. Agent strongly recommends 3rd party home inspection by a licensed inspector or contractor.” All other areas of TDS form must be completed.
- Statewide Buyer & Seller Advisory (Form SBSA)
- Smoke Detector / Water Heater Statement of Compliance
- Seller Property Questionnaire (Form SPQ)
- Lead Based Paint Disclosure (if built before 1978 - Form FLD)
- Seller Affidavit (One for each seller)
- San Diego Country Local Area Disclosures
- Addendum to the Purchase Agreement (Seller right to terminate)
- WRG Disclosure Notice
- WRG Attorney Accountant Counsel Recommendation Disclosure
- Statement of Information (For Title Company)
- All other applicable forms and disclosures
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First Client Meeting
- Provide an overview of a Short Sale. You may use the WRG Short Sale Presentation (Notebook, PC, or hardcopy presentation)
- Discuss Homeowner’s Situation.
- Provide “Mortgage Forgiveness Debt Relief Act of 2007” Handout
- Review CMA to determine value and projected list price
- Review and Obtain Signatures on all Real Estate Contracts. The TERM of the Listing Agreement should be 1 YEAR. (e.g. 5/12/09 - 5/12/10). You don't know how long it will take to complete the short sale, and you don't want the listing to expire prior to the completion of the escrow.
- Talk about using lockbox and times for showing the property. You may optionally use the “Keysafe / Lockbox Addendum” to determine use of lockbox, what day showings will begin, and showing instructions.
- If the client has questions about marketing the property, you may optionally use the Short Sale Marketability Evaluation form to assist you in discussing how to maximize marketing success factors.
- Provide and Review “Documentation Requirements for Short Sales” Handout.
- Review financial documents that will ALL need to be provided at next appointment.
- Provide "Sample Hardship Letter" Handout
- Provide "Personal Financial Statement" Handout
- Counsel the Client to be careful about talking to the lender at this point. If they are behind on their payments, they will receive phone calls from COLLECTORS, not Short Sale Negotiators. The collectors will often bully the client and make misleading statements that will confuse them about the short sale status.
- Write second client meeting appointment date and time on the “Documents Required” form given to client.
- At this appointment:
- The client will provide all required financial forms and real estate seller disclosures forms.
- The Agent or Assistant will take digital pictures of the house for property flyers and the MLS listing.
- Homeowner will provide a front door key for lockbox purposes.
- Provide the “Seller Real Estate Disclosures Package.” Briefly review the forms with the client. They should all be completed and signed, to be given at the next meeting when the financial documents are provided.
- NOTE: After the contracts have been signed, you may wish to:
- Inform the Seller that if they are not making the mortgage payments, they should try to make the property tax and HOA payments. Lenders typically will not pay for these items, and neither will a Buyer.
- The seller should also be prepared to include in the sale kitchen appliances and other permanent fixtures of the home. Many buyers are first-time homebuyers and need a minimum 3.5% cash down payment plus closing costs to purchase the home. They don’t have money to buy new appliances, etc., and this could kill the opportunity to short sale the home.
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Second Client Meeting
- Pick up all required financial documentation. Review to ensure complete package is provided.
- Pick up all real estate disclosures. Review all forms for signatures, initials and completeness.
- The Agent or Assistant will take indoor and outdoor digital pictures of the house for property flyers and the MLS listing.
- Obtain front door house key for lockbox.
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Follow-Thru After Second Client Meeting
- Review all digital pictures. Finalize best shots for MLS and property flyer.
- Develop home information and arrange digital pictures for property flyer. Create or place order for property flyers.
- Enter all property information in the MLS. You may keep the listing as incomplete until you install the lockbox. You MUST enter in the confidential remarks: “Short sale and gross commission subject to lender approval. Any commission reduction to be split 50/50.” Also, enter “yes” for the question “Subject to court or lender approval?”
- Call, fax or go online to Champion Signs to order property "For Sale" sign. If property is a condo, do not order through Champion. Agent or Assistant should go and place a sign in one of the property’s windows.
- When flyers are ready, set up Client Third appointment to place flyers in home.
Third Client Meeting
- Place property flyers in home.
- Install lockbox on property.
- Begin showing property. Change “Inactive” MLS listing to “Active” and add pictures to MLS listing if you have not already done so.
- Print copy of active MLS listing and place in file.
Active Sale Period
- Contact the Seller's lender(s), and submit to them a copy of the Listing Agreement and the Authorization to Convey Information form.
- To find the appropriate contact information for the seller's lender, you may use the 800 number on their statement, or use the internet to locate the correct contact. Here is a list of many of the major banks and their loss mitigation departments.
- UPDATE CLIENT via email or phone once every 7-10 days with lender approval and property sale status. Keep them informed and encouraged throughout the process. ENTER ALL COMMUNICATIONS INTO ACT! or other tracking system you are using.
- Field property phone calls and encourage offers.
Responding to Purchase Offers
- When Offers Arrive:
- Review for Completeness
- Call the Buyer's Agent to let them know we received their offer. We will meet with the seller shortly, and if they agree to the offer, we will obtain the seller signatures and immediately submit the offer to the bank. We will let the Buyer's Agent know as soon as we have word from the bank if the offer was accepted.
- Obtain an Estimated HUD form escrow to compute Lender’s Net.
- The initial HUD should ask for everything in the purchase offer. Let the lender shoot down any terms it does not wish to agree to, such as: Buyer closing costs, Repair credits, Home warranty, Termite report and repairs, Natural hazard report, Transaction Coordinator, etc.
- Submit the seller signed offer and HUD to the lender.
- FOLLOW UP WITH THE LENDER via phone or email 2-3 times each week. Keep them informed and let them know you are working hard on the transaction. ENTER ALL COMMUNICATIONS INTO ACT! or other tracking system you are using.
- Check on BPO or Appraisal status.
- UPDATE BUYER'S AGENT via email or phone at least once each week. Keep them motivated and encouraged throughout the process. ENTER ALL COMMUNICATIONS INTO ACT! or other tracking system you are using.
- Send out Lender counter offers as needed.
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When Lender Gives an Approval
- The Agent should ALWAYS check for deficiency judgment language that protects the seller client. If it is not present, ask for it to be inserted.
- Example Language to request: “HomeEq or its investors will not pursue a deficiency judgment if the short sale closes on the referenced loan, and will release the borrower from any and all obligations from the promissory note.”
- See Sample Deficiency Judgment Language Fax Request.
- You may also attach the C.A.R. Deficiency Judgment Chart.
- Per C.A.R. contracts, the client should also solicit legal advice from an attorney, as Agents and Brokers are NOT attorneys.
- When an Approval Letter is received, the Seller's Agent should also carefully read the approval and determine what items the lender will pay for and what items it will not.
- Pay particularly close attention to the items the buyer is requesting the seller to pay for: Buyer closing costs, Repair credits, Home warranty, Termite report and repairs, Natural hazard report, Transaction Coordinator, etc.
- Remember, the seller’s signature provides a valid contract “subject to” lender approval. The lender’s approval acts not as a counter offer, but as an addendum to the original contract, similar to the REO addendums.
- If an Approval Letter Does Not match all the terms of the purchase offer. the seller's agent may:
- With the Seller's permission, send the buyer’s agent a copy of the approval.
- Ask them to review the terms of the approval. Accentuate the positive – “we got the price your client wanted.”
- If all buyer's requests are not being granted, the buyer may choose to pay for the items themselves.
- After providing the buyer’s agent a copy of the approval letter, and discussing any discrepancies, send them an addendum that states:
- Buyer and Seller agree to the terms of the lender approval letter.
- The terms of the lender approval letter shall supersede any terms of the purchase offer that conflict.
- You may also place any other changes in the addendum, such as "Buyer to pay for Home Warranty."
- You may review an Addendum Sample.
For additional information, go to Short Sale Approval Letters and HUD Training.
Opening Escrow
- Open escrow and order title prelim.
- Ensure all real estate contracts have been signed, along with page 8 of the purchase contract, the Confirmation of Acceptance from the Buyer’s agent, and the last counter offer (if any). Submit all to escrow.
- Fax purchase agreement, counter-offers and addendums to escrow.
- Ensure the Sellers sign and return any documents they receive from escrow.
- Change the MLS listing to “Pending” and insert MLS office number of Buyer’s agent.
- Combo box may replace the electronic lockbox to make it easier for the buyer’s home inspector or appraisal appointments.
During Escrow
- Provide all Seller Disclosures to Buyer’s Agent. Coordinate with TC if you are using one.
- Receive all signed Seller Disclosures back from Buyer’s Agent.
- Coordinate with Buyer’s Agent as needed to set up a home inspection and appraisal.
- Order Termite Report and repairs ONLY upon lender approval.
- Ensure Buyer’s Loan is on track and Buyer has loan approval.
- Obtain Home Warranty Confirmation number ONLY if approved by lender. If approved, provide number or confirmation to Buyer’s agent.
- Seller’s agent to complete any remaining items required by Seller's Agent Transaction Checklist.
After Close of Escrow
- Change MLS listing to “Sold” and print out a copy for the file.
- Contact Champion Signs (if they did the installation) to have sign and post removed.
- Arrange for brochure box and lockbox to be picked up.
- Seller’s agent to ensure Seller receives copies of all documents.
- Seller’s agent to ensure file is complete and final HUD is received.
- Move completed file from “Active” section to “Closed” Section
- Send thank you note to Seller and ask for referrals.
- Add Seller to your marketing database.
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Seller - Short Sale Presentation Forms
- Short Sale Checklist
- Short Sale Information Form
- Short Sale Presentation
- Mortgage Forgiveness Debt Relief Act of 2007 - Handout
- Documentation Requirements for Short Sales - Handout
- Hardship Letter Sample - Handout
- Personal Financial Statement - Handout
Seller - Short Sale Listing and Addendum Forms
Seller - Short Sale Property Disclosures
Buyer - Short Sale Purchase Forms
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