I recently had a client who fell behind on his mortgage payments and could not find a way to be able to keep his house. He asked me to help him with a short sale. The last time I did a short sale was in '08 and the entire process took 6 months. This was a long-time client who also became a friend, and I really wanted to help him so, I agreed to do it.
The lender in this case was Chase. Usually with the large banks it sometimes feels like one is caught up in some sort of vast vortex while trying to navigate through the pre-foreclosure system. I am very pleased to report it was not as bad as I thought it would be. Chase, at least, has found it's way to a more organized and streamlined approach to the short sale process; however, the pre-foreclosure experience was somewhat exasperating. Luckily, once my client announced to them he wanted to go the short sale route, it took about 2 weeks to be assigned to a short sale team. Once we were assigned, the process moved in an orderly fashion.
To begin with, Chase has engaged a software program called Equator. Once the file has moved from the "pre-foreclosure" status and has been assigned to the short sale division, the listing agent is invited to sign up with Equator. This program actually places the agent and the file managers within the same program so that communication between all the parties can be shared. In addition to this, if you have to call into the short sale division, you are almost immediately connected to someone; you don't have to wait on hold for long stretches.
Equator is amazing for the its ability to improve the communication process. The challenges a listing agent has when trying to bring a short sale to a successful close are two-fold. The first is that she has to be on top of the required paperwork that has to be submitted to the bank. Equator makes this very easy as agents are simply required to upload the documentation through the program. There's a record of it being done and it's easy for all the file managers to locate it. A large part of that paperwork is the HUD statement. The title company will be required to submit several preliminary HUD's before the file is ever approved.
The second challenge, and I believe this is the biggest one, is keeping the buyer motivated. If the buyer's agent is unfamiliar with the short sale process it can make it even more difficult. The communication provided by the Equator system helps with that challenge since the listing agent is able to provide updates on a somewhat regular schedule to the buyer's agent. There are still gaps when you don't hear anything but Chase does attempt to set expectations by generating a message that says something like "you will hear from an agent within 72 hours." The negotiator on several times actually called me to discuss the file, which was extremely helpful.
The other challenge in keeping the buyer motivated is that the lender for the seller limits what they are willing to cover with regard to closing costs. Often times, the seller has no money to pay for closing costs, which would require the money to come from the proceeds. This eats into the final number the lender receives to cover the note. So, many of the seller's closing costs get pushed over to the buyer's side of the HUD statement since the bank will not cover them. Examples are some HOA fees, attorney fees, documentation fees, etc. The lender has no trouble covering the Realtor commission. It's difficult to know exactly what fees the lender will require the buyer to cover until one is deep into the process. If the property is priced competitively and the lender accepts the list price, it is quite possible that the "deal" the client is getting for the house will offset the frustrations the buyer is experiencing throughout the process. I found during my dealings with Chase that the negotiator understood this and was fair in his assigning of costs towards the buyer.
The only other thing to really be aware of is that the bank usually requires the approved HUD statement within 72 hours before closing. So, having a really good title company, and keeping everyone, including the buyer's lender aware of this helps that process. After the close is done, there are several documents that require signatures from the borrower(s), listing agent and sometimes closing agent that have to be submitted back to the bank. As long as the listing agent follows all the steps, it can all work out. Keeping everyone else in step, well, that's the real challenge.
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