Short Sale Guide For Real Estate Professionals

The SunTrust Mortgage, Inc.
Short Sale Process
A Real Estate Agent’s guide
to helping sellers succeed
with short sales

Ricardo Cobos, Sr. Loan Officer
919.518.8058 office
919.559.3384 cell
Ricardo.Cobos@suntrust.com
suntrustmortgage.com/rcobos

1
The information contained herein is intended as informational material for the sole and exclusive use of the business entities to which it was distributed and is subject to change without written notice.
Equal Housing Lender. SunTrust Mortgage, Inc., 901 Semmes Avenue, Richmond, VA 23224 is licensed by the Department of Corporations under the California Residential Mortgage Lending Act; is an Illinois Residential Mortgage Licensee; is a Lender in Massachusetts
having Mortgage Lender license #s ML1216, ML0133, ML1432, ML1914, ML1913, ML1815, ML2411, ML1214, ML2442, ML2491, and ML2538; is licensed by the New Hampshire Banking Department; is licensed by the New Jersey Department of Banking and Insurance, toll free
1-800-330-4684; is a licensed lender in Rhode Island; and is doing business in Arizona as Crestar Mortgage, 7250 N. 16th Street, Ste. 100, Phoenix, AZ 85020. ©2010 SunTrust Banks, Inc. SunTrust, SunTrust Mortgage and Live Solid. Bank Solid. are federally registered service
marks of SunTrust Banks, Inc. REV 031610FC

What is a short sale?

A short sale allows homeowners (sellers) who are
having difficulty making their monthly mortgage
payments to sell their home for less than the total
amount owed on the mortgage.

Once there is a sales contract on the subject property,
SunTrust Mortgage (STM) will work with the seller and
the seller’s real estate agent to negotiate and close the
short sale.

2

Who should consider a short sale?

A short sale may help sellers who:
• Are having difficulty
A h i diffi lt making th i monthly mortgage payments
ki their thl t t
and do not qualify for other Loss Mitigation remedies
• Wants to avoid foreclosure
• Can successfully list their home on the real estate market, as
opposed to executing a deed-in-lieu transaction

3

Advantages of a short sale

Key advantages include:
• Avoids the lengthy and often embarrassing l
A id th l th d ft b i legal process
l
involved in foreclosure
• Generally is less damaging to the seller’s credit rating than a
foreclosure or a deed in lieu of foreclosure
• Reduces the amount of the potential loss to the investor
• Gives the seller some degree of control over his/her situation

4

Short sale package requirements from
the real estate agent
Typically, the real estate agent will take charge of gathering
all required documentation, including what the real estate agent
needs to provide and what the seller needs to provide. The real
estate agent will then be responsible for sending the documentation
to
t STM so the offer can be negotiated.
th ff b ti t d

The real estate agent must provide the following documents:
• Arm’s Length Transaction document
• HUD-1
• fully-executed listing agreement
• fully-executed purchase contract
f ll t d h t t

5

Short sale package requirements:
from the seller
The seller must provide these documents, which the real estate agent
will then submit to STM so the offer can be negotiated:
• Signed and dated financial worksheet listing all monthly expenses
• Signed and dated hardship letter (an explanation of why the seller is unable to pay
the mortgage)
• Letter authorizing the real estate agent access to information on the account (must be
dated and include the last 4 digits of the seller’s Social Security Number and
signature, the full account number and the complete property address)
• Last two (2) years income tax returns
• Two (2) most recent bank statements (within 30 days)
• Third party authorization form (to give STM permission to speak with real estate
agent, attorney or other third party)
• Current year-to-date profit and loss statement (if self-employed)
• Two (2) most recent pay stubs (within 30 days)

6

The STM short sale approval process

STM will review the submitted information to ensure that the seller qualifies for a short sale.
We will then evaluate the purchase offer relative to the amount owed and any other issues such
as the presence of a second lien. One of our primary concerns is that the offer be reasonable,
so careful, accurate home pricing is critical.

1. Once all documentation is received, the short sale team completes a property valuation (appraisal
or BPO per investor requirements)
requirements).
2. The short sale file is then assigned to a Short Sale Negotiator on the short sale team who will
review the file including the documentation and the offer.
3. If there is any missing documentation or a need for more information, the Negotiator will contact
the designated third party or the seller.
4.
4 Once all of the required documentation and information is received and in order (refer to “short
short
sale package” requirements), the Negotiator recommends approval to the investor and/or insurer.
5. If the short sale offer is acceptable, the Negotiator drafts and sends an approval letter to the
borrower(s) and/or the designated third party.
6. The Negotiator then works closely with the real estate agent, title company and the seller to
establish a settlement date The short sale approval is valid for up to 45 days
date. days.

7

Step by step through the process

STM makes every attempt to process short sales within a time frame
that it
th t suits sellers and b
ll d buyers. B
Because ththere are often many parties i
ft ti involved i a
l d in
transaction, and each short sale is different, it is difficult to know exactly how long
the process will take. Here is an overview of the basic process:

Initial St
I iti l Steps:
• Complete short sale application received.
Note: Incomplete application will delay review/approval process.
• Property Evaluation completed (appraisal or BPO per investor requirement).
• Short sale application assigned to Short Sale Negotiator.
• Short Sale Negotiator completes initial review of Short Sale application.
• Short Sale Negotiator completes “Introduction Call” to real estate agent and seller.

8

Step by step through the process
(continued)
Additional Steps:
• Mortgage insurer approval (if applicable).
• Investor approval (if applicable).
• Additional liens negotiated by real estate agent.
• A completed net sheet/HUD-1 (
l t d t h t/HUD 1 (our payoff is not necessary).
ff i t )
• Fully executed purchase contract with all pages initialed by buyer(s) and seller(s).
• Buyer pre-qualification letter or proof of funds if cash offer.

Once all initial and additional steps above are complete:
• Short sale application decision.
• Short sale decision letters issued to appropriate parties
parties.

9

Additional information about short sales

• If the short sale fails to close, the entire short sale package may need to be
resubmitted with updated i f
b itt d ith d t d information, or th approval process may need t start
ti the l d to t t
over.

• The real state agent or seller-authorized third party should direct their inquiries to
1.800.443.1032,
1 800 443 1032 Option 3 Monday through Friday from 8:00 a m to 10:00 p m The
3, a.m. p.m.
Loss Mitigation Team will answer their questions regarding the status of the account.
The call will be forwarded to the Short Sale Negotiator as appropriate.

• Real estate agents are g
g generally allowed 5% to 6% commission based on investor
y
rules. If dual agency applies, maximum commission is 5%. Some investors operate
on a reduced commission structure and the actual commission schedule can be
confirmed during the introduction call.

10

Additional information about short sales
(continued)
• The short sale must be an “arm’s-length” transaction. The property may not be sold to
anyone the seller has a close personal or business relationship with including family
with, family,
friends or neighbors.

• During the discussion with the Short Sale Negotiator, the following will be addressed:
• Commissions
• Fees and costs
• Pricing of the property
• Timeline
• Seller Contribution

• In some cases investors and/or Private Mortgage Insurance (PMI) companies require
sellers to make a cash contribution or sign an unsecured note for some or all of the
difference between the net proceeds from the short sale and the total amount due on
the loan. This is communicated as part of the response on a short sale offer
loan offer.

11

Some often asked questions
Q: What percentage of the loan amount is STM willing to accept as proceeds
from a Short Sale?
A: As a mortgage lender, STM sells bundles of mortgage notes to investors in order to have money available to
lend to new borrowers. When STM sells a mortgage, the investor becomes the new owner of the note and
STM services the mortgage for the investor.

Q: How is an acceptable proceeds percentage from a Short Sale determined?
A: The amount STM is willing to accept on behalf of the investor is defined by investor guidelines. It is a
percentage of the home’s current value, and is not based on the remaining total amount owed on the
mortgage.

Q: How does STM, as the mortgage servicer, make money from a Short Sale?
A: STM does not make money on a Short Sale. STM does, however, lose less when a property is sold in an
approved Sh t S l t
d Short Sale transaction versus going th
ti i through a f
h foreclosure process, b
l because we will not h
ill t have t t k
to take
the property back into inventory or pay the legal fees associated with foreclosure proceedings.

Q: How are multiple offers on a Short Sale property handled?
A: STM generally asks that the seller and the seller’s agent review the offers to determine which one is best, in
terms of the net proceeds to the investor contingencies the type of financing and fewest number of days to
investor, contingencies,
close.

12

Q: If a listing states “Bank Approved Price,” how does the buyer’s agent know that this is true?
A: The listing agent should provide the buyer’s agent with written approval of the price from the
Bank.

Q: If an agent is listing a property as Short Sale, how should he/she determine the listing price?
A: The listing price should be determined as with any other listing – at fair market valuation, determined by
recent sales and comps.

Q: When can a Broker Price Opinion (BPO) be submitted, and what role does it play in a Short Sale?
A: A BPO can be provided along with the listing agreement, and can be used to assist in reconciling
significant differences between STM’s valuations and the contract price, if the parties are in
disagreement.

Q: Can a relative buy a home from another relative as an investment property through a Short Sale?
A: No. The Short Sale must be an “arm’s-length” transaction. This means the property may not be sold to
anyone the seller has a close personal or business relationship with, including family, friends or
g
neighbors.

13

Q: If a buyer is going to do a Rehab/Permanent loan to purchase a Short Sale property, how will the
valuation be handled?
A: Properties are sold “as is” in a Short Sale. Minor repairs can be considered only if there is room to
p p y
cover the cost, based on the net to value percentage.

Q: What is the contract routing process from the time the buyer signs it until closing (or until it’s
rejected)?
A: Upon receiving all of the required documentation from the seller/seller’s real estate agent, the STM Loss
p g q g ,
Mitigation Short Sale Department will obtain the valuation and then analyze the gross offer and net proceeds
anticipated, to determine if they are within investor guidelines. STM also analyzes the seller’s financials and
asset statements to validate the hardship, and determine whether the seller has the ability to contribute toward
the loss. If the offer is too low or we believe the seller should make a contribution, STM negotiates those items
with the seller a d/o recommends t at t e se e cou te t e o e to t e buye s O ce a pa t es have ag eed
t t e se e and/or eco e ds that the seller counter the offer the buyers. Once all parties a e agreed
on all conditions, an approval letter is issued.

14

Q: How does STM react to a short (or lengthy) pending settlement/closing period? Does STM adjust it,
ignore it or throw out the contract?
A: STM makes recommendations to the seller and/or the seller’s real estate agent to reduce lengthy settlement
timelines.

Q: In order of importance, what factors determine acceptance (or rejection) of a purchase contract?
A: The contract is positively received when its language meets the Short Sale guidelines (no straw sales, option
sales or assignment contracts), the contract price is reasonable as compared to the valuation, net proceeds
are reasonable as compared to valuation, seller hardship is sufficiently demonstrated, and settlement charges
are within guidelines.

Q: Within what time frame can a buyer expect to hear back from STM on a Short Sale?
A: STM makes every attempt to process Short Sales within 30 to 45 days. However, because there are often
y y
many parties involved in a transaction, and each Short Sale is different, it is difficult to know exactly how long
the process will take.

15

Service Excellence

At SunTrust Mortgage, we are committed to providing you
Mortgage
and your clients with excellent service quality.

Should
Sh ld you h have any questions regarding th S T t
ti di the SunTrust
Mortgage Short Sale process, I will be more than happy to
assist you.
Ricardo Cobos, Sr. Loan Officer
919.518.8058 office
919.559.3384 cell
Ricardo.Cobos@suntrust.com
suntrustmortgage.com/rcobos

16

Short Sale Guide For Real Estate Professionals

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