Canton, MI homeowners involved in short sales have a common concern … the length of time required to successfully complete a short sale. There are many factors that affect the timing of the process. We at “The Bittinger Team” have been able to better understand many of these factors with the positive effect of shortening the process considerably.
Canton Short Sale Home Sells Quick!
In today’s complex housing market, real estate agents are handling an increasing volume of short sales. While many agents view short sales as a win-win for both homeowner and buyer, they can cause many complications if the process is not properly understood and executed. The homeowners choice of agent to represent them is crucial to their successful and quick completion of the short sale with as little financial damage as possible.
Since there is no provision in the mortgage agreement for a short sale, the primary lien holder, the bank or mortgage company, must approve the homeowner’s request for one. Any additional parties with liens against the property, such as a second mortgage holder, must also approve the request before a short sale can commence.
While each short sale scenario is unique and includes numerous variables, the primary benefit to the homeowner is simple, it lets them avoid foreclosure on their credit record at a time when a good credit history is critical for financial and personal reasons.
Homeowners rarely enter into this process on their own. Wise homeowners seek the representation of qualified agents and other professionals with a Certified Distressed Property Expert (CDPE) designation to help them navigate the complex process. That means real estate agents, attorneys and/or other vendors uniquely qualified to communicate the homeowner’s short sale qualifications directly with the mortgage companies. Since each mortgage company or bank has their own guidelines and requirements, they play the lead role in approving or declining the terms of a short sale.
The Role of PMI in Short Sales
Generally, if the property was purchased with less than a 20% down payment and required private mortgage insurance (PMI), once the mortgage company determines the sale meets its requirements, they must request the mortgage insurer’s approval of the sale as well. That’s because the PMI company is not obligated to pay a claim until a clear property title is acquired via the foreclosure process, and must waive certain coverage requirements each time they approve a short sale to preserve the insured lender’s coverage.
PMI companies generally consider short sale requests for two reasons:
1) For loss mitigation purposes, and
2) To provide the homeowner with an alternative to a potential foreclosure.
With each request, an in-depth review of the following is conducted:
1) Purchase amount relative to property value and seller costs, such as real estate commission, attorney fees, etc. to determine if they are reasonable.
2) Loan purpose: To determine why the property was originally bought, i.e., as a primary/second home or an investment property.
3) Default situation: To determine the reason why a short sale is being requested.
4) Homeowner’s financial situation: To assess the homeowner’s employment status, credit report, income and assets, checking account statements and tax returns to make a decision on the short sale.
Homeowner Contribution, the Pitfalls and Opportunities
While many short sales occur due to the homeowner’s obvious financial difficulties, some involve “questionable” hardships, where there does not appear to be financial difficulty so severe as to make a financial contribution impossible.
Mortgage insurers strive to make their approval terms favorable so a short sale can be finalized, but it’s important that homeowners with questionable hardships, determined by the in depth review of the homeowner’s personal and financial situation, realize they may be required to participate financially in the workout.
This is typically accomplished by cash contributions from the homeowner and/or execution of an unsecured promissory note to repay a negotiated portion of the loss. In general the terms of the promissory notes are usually low interest rate and long term so that the financial burden is lessened on the homeowner. The homeowners choice of agent is crucial to successful negotiation with the best terms for the homeowner. A good CDPE will negotiate the best terms possible.
Bottom Line: Making Short Sales Work
Despite obstacles that can arise, one of the keys to short sale success is the turnaround time it takes to process each short sale request. The more experience the agent has in dealing with short sales the better the chances of successfully navigating through the process.
The agent’s team is also crucial to the process. Our staff and agent partners are all well versed in the short sale process and many also have the CDPE designation that provides them with more knowledge of the process.
Some agents don’t avail their clients of legal representation. We feel legal representation provides our clients with an extra layer of protection. An attorney knowledgeable in the short sale process can help provide that extra protection. We have teamed up with a local attorney firm that has also obtained CDPE certification. We find in almost all instances the mortgage company pays for the legal representation. The benefit is extra protection with little or no additional cost.
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