Real Estate Agents Can Process Short Sales in Seven Easy Steps


In my previous blog posts I told you that real estate agents who are tired of losing commissions to “short sale processing companies” are starting to realize that processing short sales themselves is well worth the effort. But, I’m not sure agents realize just how simple this process–which can net them some serious profits and help them build some great contacts for the future (remember that homeowners could qualify for another mortgage at a reasonable interest rate in as little as 18 months if their short sale is completed successfully–which means they’ll probably be needing an agent to find them another home in as little as a year-and-a-half…). In fact, with a little time and energy, any agent can learn to master the seven relatively easy steps to completing a short sale–in short order! 

  1. Complete a Property Valuation Analysis — Lenders will only approve a short sale if the borrower owes more than the property’s fair market value. And, the lender must be convinced that a short sale will net them more than a foreclosure. So, preparing a property valuation report that demonstrates this is the first step in the process. 
  2. Contact the Lender for a Short Sale Application — After getting the borrower’s approval in writing (this is essential), you will contact the lender with that approval. Then, it’s best to contact the lender’s loss mitigation department by telephone with the borrower sitting next to you so the borrower can answer any questions the lender may have. This step will also help you start to build a relationship with the lender that will lead to a successful short sale transaction. 
  3. Help the Borrower Write the Hardship Letter — Rather than an emotional plea, this must be a fact-based description of the borrower’s financial situation–which is heading towards a bankruptcy, a foreclosure, or both–written in the borrower’s own words. The letter must convince the lender that after analyzing the numbers, they will make more money from a short sale than from a foreclosure. 
  4. Submit the Short Sale Package — Carefully completing the necessary paperwork and submitting the documentation that proves the borrower’s financial hardship (eg. bank statements, bills, pay stubs and tax returns – aka the short sale package) is critical. Submitting proof that the property is in a condition that would require the lender to spend a bunch of money on repairs in order to sell it they foreclosed (eg. repair estimates) will also help your case! 
  5. Prepare the Short Sale Purchase Agreement — A properly prepared purchase agreement will ensure that the transaction goes smoothly. 
  6. Follow Up With the Lender During the Process — Regular calls to the lender’s agent during the process will help the transaction along. You will know right away if they have any questions that need answering or additional documentation that needs to be submitted. And, it will give you chances to charm that agent! 
  7. Negotiate With the Lender and Close the Sale — Since you’ve established and maintained a good relationship with the loss mitigation agent throughout the process (you charming devil, you!), as well as submitted a thorough, well-prepared short sale package, an approval is practically guaranteed. But, if the agent somehow finds a reason to disagree with your offer, be prepared to defend it with your comps, photos and other evidence that supports your numbers.  

Now that you’ve gotten the approval (like we ever doubted you!) be prepared to close the deal as quickly as possible. Most approvals have time limits, and deals that aren’t closed within them are usually gone for good!

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  1. There are going to be a lot of agents who will want to thank you after that article. I’m sure that they will all find it to be incredibly helpful to get new business and smooth the SS process.

  2. Elaine Edwards on

    Great article, but most important don’t forget to prepare a HUD1 to send with the package…

    Chambers Realty Group
    Short sale specialists
    Serving Mohave County Arizona

  3. Im afraid its not quite that easy. Short sales have many more pitfalls. For example, how do you keep a buyer on board for a process that will often take longer than 3 months (B of A)? [SOLICITATION REMOVED]

  4. Christina Inman on

    In response to a couple of comments…

    If a legitimate short sale is requested due to hardship or transfer, the banks are very willing to work with individuals to negotiate a fair price in a timely fashion. It will always be difficult if someone is trying to short sell for a ridiculous sale price and/or is just trying to bail out of a property for no other reason than its declined value.

    Yes, a HUD1 or settlement statement will need to be provided, preferably with the initial request. However, there are banks that will start the process and request this item in a later phase.

    Depending on which bank you are trying to work with, you will have different timelines and stages. Let’s take B of A, for example; they have been busy acquiring other banks and lending institutions, making them a little stressed in all areas of customer service. Therefore, it should be assumed that it will take months to get an approval. That doesn’t make their process more difficult than any other bank’s; it only means that their customers need to be a little more patient. I have, however, succeeded in receiving approval in three months with B of A, and I just received a short sale approval from GMAC in three weeks.

    With regards to hanging on to a buyer through a process that could take three weeks to three months, the key is simply clear and concise communication. When you accept an offer, you should take into consideration the other agents involved and their practices. Regular updates also help. It is in the best interest of an agent closing short sales to be 100% prepared prior to listing the property. The seller’s package should be put together and, hopefully, the pre-approval process started. This will also cut down on the timeline a buyer will encounter, hopefully making the entire process feel seamless to everyone involved.

    The banks will allow a switch of contracts/buyers during the process if for some reason your initial buyer does walk. So, that being said, never stop working the property, and always have back-up buyers in place.

    There are plenty of horrors stories, and unfortunately, more often than not, these are the topics about which blogs are written. It’s more fun to complain, I guess. But, if you ask around or search for the positive stories, you can actually learn a lot and find that there are quite a few successful short sales taking place.

  5. In regards to the opening item, “Lenders will only approve a short sale if the borrower owes more than the property’s fair market value,” I would have to say that is not entirely true. I agree to a point, but with properties that need a lot of repairs and therefore scare buyers away, and end up staying on the market for a LONG time, lenders are more willing to work with below-market-value offers.

  6. Christina Inman on

    I agree with you 100%! The entire meaning behind those couple of sentences was to remind everyone to be careful when submitting value reports that don’t accurately reflect or support the sales price they are submitting.

    A properties market value is what someone is willing to pay for it. The price should always reflect the condition of the property. In the initial offering all needed repairs should be noted and deducted from the Property Valuation Analysis. All factors should play into the end value, time on the market, recent sales, condition of property, area and more.

    If an automated system doesn’t accurately reflect your properties value – don’t use an AVM in the submittal package. Come up with another way to justify your offer.

    Lenders will work within a variance of the lender BPO or value they arrived at. But the reality is it wouldn’t be a short sale if the seller didn’t owe more than what they can sell the house for = Market Value.

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