Short Sale Process

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The short sale process in California follows a simple procedure that homeowners who keep head above water can easily engage in. This day lenders are more than eager to work with you in this short sale process since they can save more on this strategy should they opt for foreclosing your home. Feng Shui Investments has prepared a short sale process timeline to guide you through every stage of the process.

Keep in mind however that banks and other lenders may follow on the number of days that they process your short sale in California. The short sale process chart above is representative of most short sale process period in California. Note however that this chart is just a guideline for homeowners to know the procedure since some short sales take about a month or even a year to get the bank approve it. The actual time frame will depend on the bank.

The short sale process in California above spans at an average of 90 days and is divided into six parts namely (a) the short sale commencement; (b) the submission of offer and documents; (c) the valuation of the property; (d) the assessment of the offer; (e) the approval of the investor/ insurance company; and (f) the closing.

Because the short sale process can be vexing for the clueless homeowner, banks usually require them to hire a reliable real estate agent who specializes in short sales. FengShui Investments has dependable realtors who have years of industry experience to help you short sale your California home successfully. We will carry out most of the tasks in the short sale process so you can still focus on your other priorities.

 

The Short Sale Commencement

The short sale process begins with the homeowner experiencing hardship such as job loss, medical emergency, divorce, inability to qualify for a loan modification or other reasons that could prevent him/her from continuing his/her mortgage payments. From the Short Sale Process in California chart above, the homeowner will call his/her lender to seek authority for the short sale of his/her property.

The homeowner must call the lender and inform him that he/she wants to do a short sale. The lender will provide all information on how his client will go through this process. Some banks have their own short sale package that homeowners can avail of. For the others who don’t offer such package however, they have to inform the homeowner what documents they need to send to the bank in order to process the short sale. Among these documents, the most important one is the “Authorization to Release” that gives permission to the realtor to represent the homeowner to the lender. This allows the realtor to communicate with the lender and act on the behalf of the homeowner especially in securing all the required documents for the short sale. Not all documents will come from the homeowner though. There will be some that must be produced by the realtor too. Once all of these are in the bank’s computer system, the bank will begin evaluating if the homeowner is qualified to do a short sale.

 

The Submission of Offer and Documents by the Homeowner

It is expected that the homeowner will submit these typical requirements we called short sale package to the lender:

  • Signed and dated hardship letter
  • Authorization to Release letter
  • Financial statement of the homeowner
  • Tax returns for the last two years
  • The most recent payroll stubs for the last two months; if the homeowner is self-employed, he/she must fill out a profit and loss statement for the last three months
  • Bank statements for the last two months
  • Sales Contract
  • Listing Agreement
  • HUD-1 (Amount of estimate net gives to the lender after the short sale is done)

The realtor will have to confirm receipt from the lender within two business days.

The Valuation of the Property

The lender will send an independent licensed realtor to the homeowner’s property to conduct a Broker’s Price Opinion (BPO) valuation process. The BPO is an estimated value of the property based on the value of similar properties in the neighborhood, sales trends in the community, and the cost of needed repairs among others. Most banks use BPO but some banks use appraisal reports instead.

Once the bank places an order for the BPO, it will usually be completed within 7-10 days.

The Assessment of the Offer

The valuation along with the short sale package will be evaluated by the lender and the investor who owns the mortgage of the said property. The realtor must follow up from time to time on the progress the lender’s review to keep the homeowner updated on the progress of the short sale process.

The lender will then decide whether the property is qualified for a short sale or not.

The Approval of the Investor

Once the lender approves, the homeowner receives an approval letter. The buyer will then commence the mortgage-loan approval process. When there is 2nd or 3rd lien holder or insurance involves it will take more time and make the process more complicate. If you purchased your home with a down payment of less than 20%, then you probably had some form of private mortgage insurance (PMI).

The Closing

Finally, the buyer inspects the property together with a licensed home inspector before closing on the property. The realtor will follow up on all the inspections, appraisals, surveys, and the buyer’s financing to achieve a smooth and quick closing.

The short sale process in California can be less complicated if the homeowner makes sure that he/she submits all requirements completely and on time. Because it is a necessary strategy to avert foreclosure, a homeowner can make the best of a short sale by contacting a licensed real estate agent specializing in California short sales. This will help any homeowner who’s on financial hardship to settle his mortgage debt for less than the amount he owes. If you would like an expert review your situation and analyze what is the best strategy for you please call 800-692-1688 today. Act today or you may realize that it is already too late.