The short sale process involves listing the property for sale at a price the lender will approve, submitting documentation to the lender for approval, and negotiating with lenders who may be slow to respond. Getting written approval from lenders is important to avoid future collection attempts for any remaining amounts owed. The property value must be determined, often using brokers price opinions, and expenses of the sale are reviewed by lenders. The goal is to get approval in writing to satisfy the mortgage and promissory notes from all lenders involved.

1. The Short Sale Process An overview of the Short Sale process

2. Listing the Property for Sale A short sale can be a slow, difficult and frustrating process. It is important that real estate agent that the seller hires to market the property has a thorough understanding of the short sale process. A short sale is not an ordinary sale! In todays market, the sale price is the most important factor in selling the property. As such, the seller should have frank conversation with their agent as to what the property can really sell for.

3. The Purchase Agreement The purchase agreement must be contingent upon the following: The sellers' lenders approving the short sale, and The seller approving the short sale approval offered by the lenders* *The type of approval given to the seller is extremely important to the sellers with respect to future liability.

4. The Short Sale Package Once a purchase agreement is obtained, the short sale package is sent to the lender. The lenders often lose all or parts of the short sale package so you must be prepared to to have to re-send the short sale package. The Short Sale Package A copy of the following: The purchase agreement A hardship letter Two years tax returns Payroll stubs Listing Agreement HUD Statement

5. The Negotiator For The First Lender Each lender has their own procedure; however, in most cases, the lender will appoint a negotiator after the short sale package has been submitted. It often takes at least 30 days for the negotiator to be appointed. The negotiator rarely knows or understands Minnesota law and has limited authority to negotiate the specific terms of the short sale approval. The main focus of the negotiator for the first lender is whether the sale price is acceptable.

6. The Sales Price Approval The BPO The lender will have a Brokers Price Opinion ("BPO") prepared. This is not an appraisal, it is an estimate of the value of the property by a real estate agent. It is often a good idea for the listing agent to try to meet the BPO agent at the property and provide sale comparables to the BPO agent. Property Valuation Values can be extremely difficult to determine in markets where there are few sales of similar properties. The higher the price of the home, the more difficult it can be to find similar sales to determine the fair market value.

7. The Short Sale Approval Of The First Satisfaction of the Mortgage In order to be able to sell the property, the lender must agree to satisfy the mortgage. Satisfaction of the Promissory Note The promissory note does not have to be satisfied to sell the property; however, the seller does not want to accept a short sale approval from the first lender without a written agreement that the promissory note will be satisfied.

8. Short Sale Approval of Junior Liens Satisfaction of the Mortgage In order to be able to sell the property, the lender must agree to satisfy the mortgage. The first lender will generally allow some of the sales proceeds to go to subsequent leinholders if they agree to the short sale. Satisfaction of the Promissory Note Unlike when dealing with the first lender, the seller may still close even if the lender will not satisfy the promissory note since the foreclosure of the first mortgage will not wipe out the debt owed to the junior lienholders. The goal is often to get a satisfaction of the note for a lump sum payment or on terms that the seller can live with. Unlike the first lender, subsequent lienholders are more concerned with the financial state of the borrower than the value of the property.

9. Negotiations With Lenders Slow and Frustrating Lenders do not have to approve a short sale. They don't care about the borrowers deadlines. No isn't necessarily no and yes, isn't necessarily yes - until it is in writing, you can't rely on what they say. What You Can't See May Control the Short Sale When dealing with a lender, what you can't see is often more important than what you can see. Does the lender own the mortgage? Does the lender service the mortgage? Is there insurance coverage for the lender? The unseen factors may make it difficult, if not impossible, to obtain a short sale agreement from the lender.

10. Expenses Of The Sale Part of the Lenders Approval The lender requires the borrower to send a HUD closing statement as a part of the Short Sale Package so they can review the sellers costs of the sale. Often the lender will only approve a short sale if certain expenses are lowered or eliminated. While the expenses may be legitimate, each expense lessens what the lender will receive so they have a vested interest in eliminating or lowering expenses.

11. Post Closing Issues Bill Collectors & Lawsuits Depending on the type of short sale the borrower received, they may be surprised to find out that bill collectors may still try to get them to pay the difference of what was paid at closing and what was owed. Ultimately, the lender may sue the borrower to collect the remaining amount of the note. Defense to Bill Collectors and Lawsuits The main defense to a lender who is trying to collect on a promissory note after a short sale is the written short sale approval. If the approval is not in writing or if it does not expressly state that the lender waives their right to seek a deficiency judgment, it may be difficult to stop the collection attempts of the lender.