Short Sales – Behind the Scenes

How to Prep for a Short Sale

There are many things you can do to improve your chances of a successful short sale such as:

• Starting as early as possible in the default process
• Having a fully ratified purchase contract
• Listing agreement
• Preliminary HUD-1
• Homeowner’s signed and dated hardship letter detailing why they are unable to pay on their loan(s)
• Homeowner’s Income and Asset verification, including tax returns commonly requested

Understanding a Short Sale Behind the Scenes

In addition to getting all your ducks in a row, as mentioned above, understanding relationships behind the scenes will help relieve your anxiety and help you prep for your short sale.  The crucial question banks will ask themselves: Is the completed short sale transaction the “best execution” for their counter-parties – lender, investor and insurer?

• Short sale approval decision isn’t usually delegated to the lender/servicer, but must come from one of the behind the scenes counter-parties:
  - Fannie Mae, Freddie Mac, MBS Insurers or other investors
  - Guarantors such as PMI companies or Ginnie Mae
• The “Best Execution” resolution that is perceived to maximize the gain or minimize loss to the end counter-party investor/insurer behind the scenes.
  - Appraisals and broker price opinions (BPOs) are key in determining this.
• Note: Sevicers are in the business of servicing loans and would generally prefer to utilize a strategy to keep the loan in place, such as a forbearance agreement, repayment plan, or a loan modification.

Visual of the loan ownership and servicing hierarchy for short sales