Advice for Negotiating a Short Sale With a Bank
Short sales accounted for 12 percent of home sales in a August 2011 RealtyTrac survey, according to an August 2011 article in USA Today. Negotiating a short sale is a long and difficult process, which can become trickier if you have liens against the title to your home. The government can help expedite your short sale process and you can contract out negotiations to a more experienced mediator.
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Review the Title
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Run a title search from a titling company and look for liens against your property. If your property has junior lien holders, such as a home equity lender, you will have to negotiate with them and the original mortgagor concurrently. Junior lien holders often accept buyouts for pennies on the dollar because they usually receive nothing if the primary lien holder forces foreclosure. The bank's negotiator might offer junior lien holders a cash incentive to push the short sale forward.
Patience
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Most short sales take between four and six months to complete, according to a September 2011 story in the Boston Globe. A single negotiator for the bank can have more than 100 cases on his desk any time. You should keep in constant contact with the bank's negotiator to keep your case fresh in his mind. However, you also need to be patient with the lender. Months of red tape can make some parties involved angry, such as a real estate agent, which could delay or destroy a deal.
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HAFA
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Ask your mortgage lender about participating in the government's loan modification program for short sales called Home Affordable Foreclosure Alternatives Program. Under HAFA, the lender receives cash rebates to cover administrative costs and payments to junior lien holders and you receive $3,000 for relocation expenses. The lender must use standardized HAFA forms and time-lines as well as giving you a list of approved terms before you put the property on the market.
Negotiating Service
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If you cannot handle the short sale negotiation yourself, shop for a short sale negotiation service. You might be able to to get the bank to pay for the negotiator on your behalf or have the potential buyer pay for it. Also, explore Chapter 7 bankruptcy. Tell your creditor that you plan to let the house go to foreclosure and file Chapter 7 to discharge any deficiency balance if you cannot reach an agreement on the short sale. You might need to offer a lump sum payment to pay off the mortgage delinquency as an incentive to the creditor.
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References
- USA Today: Number of Short Sales On The Rise
- AGBeat: Two Tips For Negotiating a Short Sale With a Junior Lien
- The Boston Globe: Short Sales Still Not So Short?
- NuWire Investor: Short Sale Negotiating Tactics
- National Association of REALTORS: Home Affordable Foreclosure Alternatives Program (HAFA)
- Bills.com: Negotiate Short Sale
