Do All Lenders Require A Short Sale To Be Listed?

16 Replies

Ibrahim,

No Most will want it to be listed but the ones I have done in the last two years have not been listed.

However they were distressed situations. They hadn't been paid on for 2+ years and basically the banks had written off the mortgages. One was a small bank and one was Chase.

Thanks Ned. Did these banks allow the buyer to negotiate the short sale or was a separate negotiator hired? Did you have to go through the formal short sale process (BPO, financials of borrower submitted etc.) or did they just allow you to make an offer to settle?

These two we found because they were in tax sale foreclosure. Neither had any mortgage payment made for probably two years or more. We used the fact that they were in tax sale as leverage to negotiate.

The first one was a small bank in the midwest. When I called I was quickly referred to the in house attorney. The bank was so small he immediately knew which property I was talking about. It was a $150K renovation loan. A lot of work had been done on the inside but the outside looked horrible. Also the property next door sold as an REO at a low price. We sent a small package with exterior pictures and the comp from next door.

The next one Was Chase. We offered to purchase the mortgage. They said they don't sell mortgages but they would do a release of the mortgage. They were owned $66K. The taxes were $50K. We got them down to $5K

We did not send BPOs, HUD-1s, owner financials, or submit through any special Short sale online system. For chase we did send a hardship letter. We did the negotiation ourselves.

Thanks Ned. I've done a few of these. Never considered them short sales because (1) it was at a time when short sales weren't as popular as they are now and (2) the mortgage lender wasn't foreclosing. Just sitting there waiting to lose his collateral during an impending tax foreclosure.

Interesting nonetheless. Thanks again.

Maybe more light going deeper, bank regulators require a bank to show that any REO/ORE held is being actively marketed for disposal. It's hard for a bank to meet that requirement without listing it. Short sales are not bank owned but if less than the amount due is accepted the same issue surfaces, show that the offer was reasonably the highest and best in the market, showing that the property was exposed to the open market meets this threshhold much better than a private sale arranged by the seller.

When there are commercial properties say an industrial property, the market is limited and you'll find that the banks may cut a deal in some areas where it has not been listed, in such cases the regulators use judgment as to compliance and meeting the highest and best offer.

Residential properties have (usually) a strong open market, so the bar is higher. Much of it is CYA. :)

We actually just did a Blog about this. There are lenders now who have created programs to start a short sale without having it listed yet like BofA. In fact some of these programs are giving homeowners incentives for starting the short sale earlier. These incentives are starting to be larger than what you would receive if you started the process after an offer and after 8 months late.

Brett,
Exactly, but these are PreApproved short sales where, in addition to qualifying the seller, a sales price, or net to lender, is established Before the property is listed. We do BofA and HAFA preapproveds on a regular basis. Actually, for a Freddie Mac owned loan, a preapproved short sale is the only way to qualify for HAFA. If you bring them a purchase contract with your short sale package, HAFA is denied Forever.

Originally posted by Sean F.:
Does anyone know if Wells Fargo requires the prop to be listed?

All major banks (including WF) will require the property to be listed before they consider any offers...

Yep, and the old list it with an immediate sales contract makes them look twice at it. They'll still require a BPO for valuation, whether it's a pre-approved or traditional.

All big banks for sure will require the home to be listed and will require the realtor to sign documents with their license #. These are usually realtor certifications and Listing Addendum's.

This isn't a bank requirement. It's an investor requirement and not all investors require a property to be listed. For example, FHA sales are NOT required to be listed and FHA is an investor and can use several servicers, WF, BOA, Chase etc. You have to know what the investor guidelines are for the property. I would say that most portfolio loans, all freddie and fannie do need to be listed, but no, it's not always a requirement per the investor.

If they require it to be listed, doesn't mean it has to be placed on MLS unless they require which therefore provides you with "non-mls" listed property and more attractive if you plan on flipping it. :)