No More Short Sale FSBO’s-Banks are getting strickter

If you are an investor, you probably remember the days of double-closings and quick flips.  If you are a listing agent that specializes in short sale listings, you are familiar with the long and tedious process from listing to closing.  Over the last several years, the housing market has seen some turbulent times and it has taken a long time for lenders and agents to adjust.  With the number of foreclosures, REO properties in inventory and the popularity of short sales, new guidelines to deal with the market have been initiated.  The new short sale changes affect investor transactions and how short sales transactions are processed.  Some may see these changes as good and some may not.  Nevertheless, the changes are here!

Some things to be aware of are:

1.  A licensed real estate agent must represent the seller if they intend to sell their home as a short sale.  Both Bank of America and GMAC are now asking for the agent’s license number and in some cases, proof from the state that the license is valid and in good standing.

2.  Lenders are no longer allowing a short sale transaction to be submitted for review if it is a FSBO (For Sale by Owner) transaction.  Since both the lender and the seller are facing a loss, lenders want to make sure they and the seller are fairly represented.  To minimize loss, the lenders want to make sure they have the opportunity for the best and highest offer possible.  If the seller is faced with a possible deficiency judgment, they want the same.  Therefore, if the seller requests to sell their home as a short sale, a licensed real estate agent must list the property.

2.  Freddie Mac initiated a new Homeowner Assistance form for sellers requesting to sell their home as a short sale.  This form asks for both the listing date and the date of the purchase contract.  If a property was listed and a contract received within a few days of each other, the lender may think a higher offer could be possible if the property is on the market a little longer, especially if the current BPO value comes in higher than the offer.  Additionally, if the original short sale package was submitted as a FSBO, it will most likely be cancelled.  If the short sale package was originally submitted as a FSBO with an offer and then you list the property with an agent, be aware if you do not change the contract you will have a contract that precedes the listing.  A bright negotiator may recognize this giving the file a second chance at being declined.

3.  Shorter timeline requirements for lenders mean shorter timeline requirements for sellers.  If a lender processes short sales in the Equator system, tasks are systematically issued to move the short sale through the phases.  These tasks have due dates.  If the tasks are not completed when due, the file can be ‘hard’ cancelled out of the system.  While you can reinitiate a short sale in Equator after it has been ‘hard’ cancelled, repeated ‘hard’ cancels for not complying with required due dates can keep you from being able to reinitiate the short sale multiple times.  If you are a listing agent looking to take on a short sale listing, make sure your seller understands the importance of providing all required documentation within the timeframes required.

4.  Purchase contracts are also being scrutinized and checked for accuracy!  Wells Fargo, Bank of America and FHA do not allow e-signatures on any contractual documents.  Therefore, to save time and redundancy, it is a good idea to have all parties put their real ‘John Hancock’ on the contract documents from the start.  In addition, depending on the investor or the short sale program a seller qualifies for, specific verbiage may also be required either on the listing agreement or on the contract.  For instance, FHA requires specific cancellation verbiage on the listing agreement and the assignability clause to be removed from the contract.  If you are unsure what is required, it is a good idea to check with the specific lender for any other contractual document requirements to save time and to reduce the risk of having a short sale file cancelled because of a technicality.

You can no longer procrastinate with the lender’s requirements and you need to push your sellers if they are not cooperating.  If you don’t, you may find your short sale has been cancelled.  The lenders are implementing their new policies.  Listing agents and sellers must follow suit.  Change is never easy and while some of these changes may be difficult to adjust to, they are beneficial for all parties involved.  Short sales have become the norm and are a primary part of the real estate market.  If we all get with the program, these transactions just may begin to close as quickly as traditional transactions!