The success or failure of your short sale depends on where you live. It should not be, but it is. How banks are handling short sales varies dramatically based on where you show up on Google maps. I’ll explain.
A short sale is the sale of a home at a price less than the current mortgage balance. While a buyer and seller may agree on a price that is less than what is owed on the mortgage, obviously in order for such a transaction to close, the bank has to agree to accept less than what they are owed. Without their agreement, they will not issue a reconveyance of the deed of trust extinguishing the promissory note on the debt.
Bank short sale departments have been totally overwhelmed by the volume of short sale requests (let’s not even get into the foreclosure chaos that has also overwhelmed the banks). They did not gear up for this, which means they do not have systems in place to manage short sale requests. A bank has a lot of due diligence they are obligated to do in the process.
They must process an offer from a Realtor and coordinate with the seller, their client. This means having an organization that can manage files, computer database records, and compile all loan and value information from various sources (which exceeds the capacity of many bank databases at this time). They must put together a checklist of information and documents they need to process a short sale request, and as one short sale clerk told me,
“Sir, we have multiple checklists, depending on who is the supervisor at the time, and I’m sorry but it’s chaos in our short sale department. I’m not supposed to talk like this. Our investors are demanding that we require certain items, no matter how impossible it may sound, and we have no flexibility. We have requirements, which vary as I said, and we apply those nationally. I’m so sorry but our investors are requiring this, and I have no authority to help you, no matter how reasonable your request may be in your market, if you cannot meet all of our [multiple] checklist requirements. And I cannot promise you that the offer will be considered within any particular time period. We usually take 30 to 90 days to process a request, but it could take any amount of time, but we have files we haven’t been able to get to in months.”
The result of such chaos and lack of good organizational systems is that bank short sale departments have implemented systems on a regional basis. So Las Vegas and Phoenix short sales (and foreclosures) are handled much differently than a small out-of-the-way market like mine in Sequim and Port Angeles on the Olympic Peninsula in Western Washington. Short sales are being approved daily in the Vegas market, but not here. It is like pulling teeth to get a bank to cooperate on a short sale here. I take that back, because it is much harder than pulling teeth.
Do the bank short sale departments specifically and intentionally create different systems around the country? I seriously doubt it. I think the more likely explanation is that they reach the practical limitations of manpower, money, and other organizational resources. Their pipeline is getting clogged up in numerous places, so where do they focus their resources first? In the larger markets that have crashed with thousands of homes in foreclosure and thousands needing to be sold prior to foreclosure as short sales.
The reason this is important to understand is that rules and principles for handling short sales that work in one part of the country may not work so well in another part of the country. While many are out making millions selling their short sale secrets and systems, for the Realtors among us who get involved with short sales, it is important to know that what worked in Miami might not work in Tacoma or Sequim. The process, the paperwork, and the people will all be different. As with every real estate transaction, every short sale must be handled on its own merits and each client given the highest customer service to work through the unique issues in that transaction. Be prepared to spend between three (3) and five (5) times as much sweat and labor on a short sale as you would on a regular sale.
Last Updated on July 27, 2012 by Chuck Marunde