In a previous post, view here, we went over how long it takes for a short sale to close in Reno and Sparks. Including days on market and contract to close. Now we are going to give a few tips on how to increase the speed of your closing or finding quicker ones to put an offer on.
Check in next week to see how to speed up a short when you’re already in contract.
1. Stay away from MI: Mortgage insurance is paid monthly (also upfront in FHA) to protect the investor in case of default. Some PMI companies are no problem to deal with as they may have a pre-approved loss they are willing to take.
For homes deeply under water the file may have to be submitted to the PMI company for review and approval. These PMI companies are slow to move and in many cases will reject the short sale because it is in their best interest to foreclose. Unless it’s your dream home stay away from homes with mortgage insurance.
2. Pre-Approved: HUD PFS (FHA short sales), HAFA, and now some BofA short sales come pre-approved. The servicer sets a list price for the home and potential buyer’s must meet a certain “net” due to the lien holder. In the HUD program this net is 88% of the list price within the first 30 days of marketing. Programs like this tend to give approval letters within weeks instead of months.
3. Previously Approved: A previously approved short sale is where a buyer has gone through the process until bank approval and backed out. There could be many reasons for backing out including not agreeing with the approval amount, couldn’t get a loan, or bad inspections reports. Once the buyer backs out the home is put back on the market at the approved price.
There are positive and negative aspects of previously approved short sale. They tend to have quick re-approval times like pre-approved short sales but you need to offer at or near what the previous buyer did otherwise the file has to be re-negotiated.
4. Completed BPOs/Appraisals: During the short sale process the servicer will order a BPO or appraisal in order to make sure your offer isn’t too far off the ball. This process usually takes multiple weeks so offering after the valuation has been completed can save some time.
One thing to remember is that the valuations are time sensitive and last for either 3 or 6 months. Write an offer right before or after they expire and the servicer will need to order a new one. This can be bad if you’re in an appreciating market as the new result may be for more than you offered and a counter offer will be on its way.
5. Delegated Authority: Some servicers are allowed to make an approval on a short sale without asking the lien holder for permission. Similar to the MI situation some servicing contracts allow the servicer to approve a certain loss amount without having the lien holder review the documents. This delegated authority can shave weeks off your wait and relieve some stress since lien holder approval is at the very end of the negotiating.
6. Agent/Negotiator Experience: I’ve seen no real difference between agents and paid negotiators working a file. Some say it’s better to have a negotiator whose sole job is to negotiate while others say it’s better to have the agent do it since they have the fiduciary responsibility with the seller and it takes away one layer of communication to get through.
7. 1 Loan versus 2 loans: Juggling one thing is easier than juggling two things. For short sales with two loans the short sale package must be sent to both servicers. Both must agree to the short sale and the amount the 2nd lien received must be negotiated from the 1st lien holder’s proceeds. Communication between the two servicers is horrible , really adds time to process, and now there is one more person that can derail the sale.
You may be thinking if they’re both with the same bank then easy peasy but it’s not true. Even at the same bank the 1st and 2nd lien departments are usually not in the same building and have poor communication between each other. Remember, the servicers are doing the bidding of the lien holders and lien holders don’t usually own both loans in a transaction.
8. Your Offer: Write a clean and realistic offer. Countering back and forth with the bank can add weeks to the approval time. These bank aren’t that stupid. If they don’t know the value of the home they will pay someone to tell them what it is. It’s pretty frustrating to have a seller accept a low ball offer only to be countered by the bank three months later. Save the stress and headaches by writing an at or near fair market offer from the beginning.
Hopefully, this will help you find a short sale that is somewhat quick and painless. Check back in a few days for a post on how to speed up a short sale when you’re already in contract.
For more information on short sales or buying a home in Reno and Sparks contact Ricky at (775) 750-1437 or Ricky@Resnv.com