Short Sales
Suggestions and Practices
Listing Agent
Disclaimer:
The information provided in this document is not intended to be a substitute for or provide legal advice to the
agent and brokers or buyers and sellers. In fact, it is highly recommended that the reader consult with his or her
own attorney for legal advice in connection with short sales and any other matter that creates potential legal
issues. Further, the authors of this document, and the North San Diego County Association of REALTORS® in
publishing this document, do not represent that its contents set forth a "standard of care" for brokers or agents
with reference to short sales or any other matters. As stated in the title of this document, the information
provided is intended to provide practical approaches to short sales, as well as suggestions in that regard, and
by no means is this publication a representation of a minimal or requisite standard of care in the real estate
industry. Each transaction is unique and different and sellers, buyers, agents, and brokers should consult with
their own legal counsel in connection with each such transaction. Please note that it is the recommendation of
the authors that agents, brokers, buyers and sellers use CAR forms, including but not limited to the Short Sale
Information and Advisory (CAR form SSIA), the Short Sale Addendum (CAR form SSA), and all other
applicable CAR forms.
North San Diego County Association of REALTORS®
Short Sales Suggestions and Practices – Listing Agent
©2011 North San Diego County Association of REALTORS®
1
Pre-listing
Consider partnering with another agent or mentor to assist you and the seller with the short
sale.
1) CONDUCT A THOROUGH SELLER INTERVIEW
TIP ‐ Confirm in writing your recommendation that your clients obtain advice from an attorney and CPA before signing the listing. TIP ‐ Require the seller(s) to sign and initial CAR's Short Sale Information and Advisory (C.A.R. SSIA 11/10) before signing the listing. a. Determine Seller Motivation
 The short sale process can be demanding on homeowners. They NEED to be prepared.
b. Determine Seller Hardship
 Your chances of getting a short sale approved is greater if the borrowers' lender agrees that
the seller is experiencing a financial hardship and has few other options.
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Their hardship should be verifiable.
c. Determine that Sellers Understand the Consequences of a Short Sale
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A short sale is not without consequences to the homeowner.
Without giving legal advice, encourage sellers to seek legal and tax advice from
professionals (attorney and CPA) who can assist seller to determine what consequences (if
any) they may encounter with selling as a short sale.
d. Determine that Seller Stays Engaged in the Process. Seller fatigue can be a problem in
lengthy short sales.
e. Determine What Type of Loan(s) Seller Has
 Each type of loan has different programs available for distressed homeowners.
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Each type of loan may have different procedures for short sales.
Fannie
Freddie
HAFA
Determine what Federal program, if any, the seller may qualify for or fall under.
2) OBTAIN DOCUMENTS FROM THE SELLER
a. Obtain a copy of a current mortgage statement for all of the loans on the property.
b. Request seller sign a Third Party Authorization form- allowing you to speak to their lender.
TIP ‐ Be sure the authorization is signed, dated, includes all individuals on the loan, has at least the last four digits of the borrower's Social Security number, their full loan number; be sure that it lists by name all of the individuals who may be calling in for file updates (i.e. your asst., TC and Escrow officer). 2
Pre-listing (continued)
c. If possible, see if seller has a copy of their original loan application for the current loan.
d. Have seller complete a Statement of Information (from title company), especially if sellers have
common names.
e. If there is an HOA, obtain a copy of the HOA statement.
3) BEGIN A HARDSHIP PACKET CHECKLIST
a. Leave seller with a checklist of items to collect or create for a Hardship packet.
b. Most lenders will require the following items from a seller for a short sale submission
The list below may not be complete. Lenders may have additional requirements and
specific forms
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Current mortgage statement(s)
2-months of bank statements- for all accounts and for all individuals on the loan
1-month of current paystubs (or sources of income)
Last 2-years of tax returns
Completed Financial Worksheet- showing monthly "net" for seller
Property condition and repairs list
Hardship letter prepared and signed/ dated by seller
NOTE ABOUT PRIVACY
As the listing agent you will be asked to handle very personal and confidential information and documents.
Be sure to have a system in place to safeguard the seller's personal information and records.
TIPS
Have seller make a copy of this completed Repair list form. Leave copy at property. Be sure that seller gives completed form to BPO agent during Valuation visit. If repairs are needed (especially health & safety issues) get bids‐ preferably two (2) ‐to have work corrected and include in packet. There are plenty of resources online to assist the seller to write an effective Hardship letter. Letter should explain seller's current situation, how they got "here," what efforts have they taken to correct the problem, and that seller is interested in a short sale. It is recommended that agents stress to seller the importance of always providing truthful, complete and accurate information. Failure to do so may result in a delayed approval, rejection of Short Sale request, and could even cause further legal issues. Note‐ many lenders will want to know that the seller has already considered and rejected a loan modification, or is not interested in a loan modification, BEFORE they will consider a short sale request. TIP ‐ It is likely that during the process lender will want financial info and records updated. Prepare seller for this by having them keep new statements handy as they receive them. TIP ‐ Give seller a deadline to finish with gathering info on Checklist. TIP ‐ Have your attorney create a notice for seller to sign informing them how you will protect their privacy while explaining that during the dealings with their bank(s) you will be asked to release their info to other parties and that you may not be able to control who has access to it. 3
Pre-listing (continued)
4) MAKE INITIAL CONTACT WITH THE LENDER
a. At soonest opportunity fax Third Party Authorization to lender(s)
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Many lenders will take anywhere from 24 hours to 5 days to be able to confirm receipt of the
Third Party Authorization fax.
b. Once authorization is established, contact the bank (Short Sale Dept. / Loss Mitigation Dept.).
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Inform them that the seller has listed their home and will be requesting a short sale
approval.
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Inquire about any special forms or documents that they may require.
TIP ‐ Many lenders have their own Third Party Authorization and forms, which are often located on the lender’s website. □
Ask lender to describe their short sale process and how long they estimate responses at
each phase.
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Ask how lender wants to receive the packet (if by fax, obtain the number. Often it will be
a number different than the Third Party Authorization fax number).
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Ask how the lender wishes you to handle all offers received, including subsequent or
backup offers or any offers that are received after submission.
TIP ‐ If lender(s) state a preference or policy on how they wish you to handle all offers, seek to get it in writing from lender. How you and the seller handle and make lender aware of the existence of other offers could have legal, tax, and financial consequences. Encourage seller to seek professional advice of a tax accountant, lawyer, and CPA. □
If lender has the first and second loan on the property, will they combine it into one file or
do you need to submit two complete requests?
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Does lender have a policy for "selling" or "transferring" file to collections after a certain
number of days delinquent (i.e., 180 days)?
5) PULL REPORTS/ VERIFY RECORDS
a. Pull current tax records- showing current and any past due amounts.
b. Verify that you have information and authorization for all parties on title and loan.
c. Submit SOI/SI to title company to check for all liens (secured and non-secured).
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List & Market the Property
1) REQUIRED INFORMATION
a. Be aware of any CAR required forms for short sale listings.
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At the time of this printing- CAR recommends the SSIA to be included.
b. Be aware of any comments, disclosures or mandatory fields required by MLS provider.
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At the time of this printing, Sandicor requires that short sales must be properly categorized.
c. Be aware of special comments required concerning CBB offers and possible changes.
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d.
At the time of this printing, MLS rules require specific documentation on how changes (if any)
to the offered commissions will be handled. Failure to properly follow guidelines could result
in a financial loss to listing agent and/or broker.
Add to "confidential remarks" (or wherever allowed by the MLS) comments indicating
that in the event the short sale lender requires a reduction in the gross commissions,
that the listing agent and cooperating/sales brokers agree to reduce their commissions on
a proportionate 50/50 basis.
2) PRICE HOME COMPETITIVELY BUT WITHIN RANGE OF FAIR MARKET VALUE
Prior to issuing an approval, seller's lender will attempt to determine current market value of home.
Competitively price home for "30-day sale." Many agents will price the home to the lower side of the current
value range for recent comps.
NOTE- Since the seller may have some legal, financial, and tax implications resulting from the shortfall, often it
is in the seller's best interest to sell the home for as much as possible to help mitigate the banks’ loss. A seller's
motivation to sell quickly may change as they progress through a Foreclosure process- make sure the seller is
aware of the possible consequences of "selling low" by recommending seller consult with an attorney and CPA.
TIP ‐ Get it in writing (again) that you recommended your clients to get advice of a tax attorney or CPA professional.
3) ADDITIONAL RECOMMENDATIONS
To help the selling agents, and reduce the incoming inquiry buyer agent calls, consider putting notes
in the “Confidential Only” remarks section regarding:
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How many loans
What actions have been taken
At what point in the process
Whether seller qualifies for any special short sale process - i.e., HAFA, etc.
Be aware that at the time of this draft, Sandicor does not allow any comments concerning short sale in
the “Public Remarks” or “Supplemental” sections.
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Entertaining & Accepting Offers
NOTE- this area of short sale practices seems to be the most heated and debated, with very different opinions,
even among legal professionals.
THE PRACTICES LISTED BELOW AND THROUGHOUT THIS DOCUMENT ARE USED BY THE REALTORS® ON THE PANEL AND SHOULD NOT BE CONSIDERED AS LEGAL ADVICE OR RECOMMENDATIONS. 1) INITIAL OFFER(S)
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Present and review all offers with the seller.
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Be sure that Selling Agent included a Short Sale Addendum with offer, signed by the buyer.
Remind seller that they are still the legal owners and have the right to accept, reject or counter
any offer.
If not, seller will need to counter form into contract.
TIP ‐ If this is the first offer received and it is the "early" stages of the short sale process it is the opinion of this Task Force that the "will wait" date on the SSA should be at least 45‐60 days from offer date. At the time of this draft, many lenders and Federal programs are seeking to reduce the review period. So in the future, this "will wait" date could be reduced accordingly. Most lenders require a Fully Executed contract to be included in the Short Sale Request Submission.
So sellers do/should accept an offer that is suitable to them.
It is the belief of this REALTOR® panel that the parties, the process, and the industry is best served when
seller accepts and submits one offer from a committed buyer that is at a fair market price for the
particular property/market.
TIP ‐ Since most lender approval letters will name the buyer by name, it is important that the seller try to select a buyer that appears to be committed to the process. TIP ‐ Since any change to the lender's net settlement will have to be approved, pay close attention to values, comps and appraisal issues when selecting the "best" offer to submit to the lender. Selecting and submitting an offer that is too high and will not likely appraise will cause issues and delays down the road and may even cause the short sale lender to close the file if you can not deliver the "net" settlement listed in its approval letter. 6
Entertaining & Accepting Offers (Continued)
2) SUBSEQUENT OFFERS
Note: unless instructed otherwise in writing by the seller, all offers received need to be presented to the seller.
If seller's lender has already instructed you on how to handle subsequent or additional offers, follow their
guidelines AND DOCUMENT EVERYTHING.
If lender has not provided any guidance (written or verbal), when you present the "new" offer to seller,
inform seller:
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That their lender may have an interest in knowing about the existence of another offer,
especially if it offers a better "net."
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That most lenders will only consider one offer at a time. Many lenders will close the first file and
start the process completely or partially over with each new submission.
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If the lenders start the process over, even partially, it could delay the ultimate approval, which
could have an impact on whether the seller is able to successfully sell short before a Trustee
Sale date.
After informing the seller on these issues, it will be the seller's decision how to proceed.
Many agents believe that the best course of action is to hold subsequent offers in back-up positions, in order of
receipt, in case the primary buyer withdrawals offer.
It is recommended that you and your seller seek legal advice based on the particulars of the situation.
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Preparing & Submitting Hardship Packet and Request
1) ORDER AN ESTIMATED HUD1 FROM ESCROW
Based on the accepted offer, have escrow prepare a HUD for the submission. Be sure that HUD includes ALL
costs (current, projected, and anticipated) for a future close date. Be particularly aware of outstanding HOA
dues and fees or delinquent property taxes and CDF fees that will increase over time.
Be sure that title has run a search for all liens based on completed SOI/SI that seller provided.
Be sure to request that Title perform "Date Downs" periodically on file to ensure no new items appear.
Whenever possible or appropriate consider adding a little "padding" throughout the HUD to help.
TIP ‐ Because short sale lender(s) will likely during the approval process make several requests to change the terms of the offer that will need to be reflected on updated HUDs, be sure to work with an escrow officer and company that is willing and able to assist you with a quick turnaround on HUDs and who is willing to help prepare and revise as necessary several HUDs for the same property during process. 2) PREPARE PACKET FOR SUBMISSION
Gather all the documents that the lender requested for their short sale submission.
Most lenders will want the following items in a submission packet (does not have to be in this order).
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Third Party Authorization
Listing Agreement
Copy of Listing
Purchase Agreement and all attachments
Information on buyer qualifications and proof of funds
Seller's Hardship Letter
1-month of paystubs
2-months of bank statements for all accounts
Last 2-years tax returns
Sellers' Financial Worksheet
The property condition and repair list completed by seller
Consider including the following additional items:
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A Table of Contents for the packet
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A Contact sheet, providing contact info for all parties
 Seller
 Buyer
 Agents
An overview written by listing agent, that provides brief synopsis of:
 Seller hardship
 The property
 The immediate market
 The buyer's offer
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Preparing & Submitting Hardship Packet and Request
Continued
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Escrow or closing officer
Buyer's lender
Anything else that supports the file and explains the seller's position
 Divorce paperwork
 Medical bills
 Collection notices
 Label EACH page with borrower name, loan number, and page number
FAX (or Overnight) entire packet to all lenders on the property
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Post Submission & Follow up
1) HAVE A DIARY AND CALENDARING SYSTEM FOR ROUTINE FOLLOW-UP WITH LENDER
Within 72-hours follow up and verify that lender received complete packet.
TIP ‐ Weekly follow‐up calls to the lender will help to keep the file moving forward and will bring to your attention anything that is missing or is being requested. o Be proactive. Do not wait for the lender to contact you for missing items. o Document who you spoke to, what they said, what actions were taken and the date. 2) HAVE A SYSTEM FOR PROVIDING FREQUENT, REGULAR UPDATES TO SELLER AND
BUYER'S AGENT
Inform all parties once the lender has confirmed receipt of packet
TIP ‐ The biggest frustration with short sales and one of the main reasons cited why buyers lose interest in a property is due to lack of updates or follow up from seller and listing agent. Keep your deals together by keeping everyone updated as frequently as possible. Even no news/no updates should be shared. 3) EVERY TIME NEW DOCUMENTS ARE REQUESTED AND PROVIDED- FOLLOW-UP WITHIN
72-HOURS TO CONFIRM
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General & Additional Recommendations
1) KEEP TABS ON NOD OR PRE-FORECLOSURE ACTIVITY
Do not assume that the lender will suspend foreclosure activities since a packet was submitted.
Most lenders do not automatically suspend their foreclosure or collections activity.
Short sales are often handled by a different division within the bank other than foreclosure.
If seller is at risk of going into foreclosure or there is a Trustee Sale date scheduled, the listing agent needs to
be the "go-between" the two departments. Don't assume that the departments are communicating.
If the banks' contact tells you that they suspended the Trustee Sale, get written verification.
Locate the trustee contact information and contact them or subscribe to a service that tracks foreclosure and
pre-foreclosure activity.
TIP ‐ If possible written verification of Trustee Sale suspension should be from an officer or other authorized representative of the bank who has authority to bind the bank. Seller should be encouraged, in writing, to consult with an attorney regarding the status of the foreclosure. 2) COMMUNICATE WITH JUNIOR LIENS
If there is more than one loan on the property, the listing agent or seller will negotiate and communicate
between the lenders. In most cases, even if it is the same lender, the two divisions do not speak to each other.
3) WATCH THE DELINQUENCY DATE OF JUNIOR LIENS
Many junior lien holders "sell" the note to collections companies or transfer them to the "Recovery"
departments if/when the loan reaches a milestone number of days in delinquency.
TIP ‐ Watch out for 180 days‐ Each lender has their own guidelines, but 180 days delinquent seems to be a milestone for many lenders, at which point they take action(s) on a file that may make it more difficult to get a short sale approved.  If several weeks/months have passed since original submission, consider getting updated financial
records from the seller and submitting to bank.
 Be sure that Title company is performing Date Downs and, if necessary, revisions to the HUD are
being done and submitted to negotiator.
4) STAY AWARE AND UPDATED ON THE SELLER'S ONGOING FINANCIAL SITUATION
A seller that files for bankruptcy during the listing, will likely delay the possibility of being able to sell short, if
ever. A seller whose financial situation IMPROVES (got a new job, had an unexpected financial gain)
during the listing may also prevent a lender from agreeing to a short sale settlement or issuing a settlement that
the seller is willing to accept (large cash contribution or promissory note or both).
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Once Short Sale Approval is Offered by Lender
1) If lender offers a written approval, review it carefully. Provide a copy to seller and, confirm in writing, your
advice that the seller consult with an attorney and CPA before accepting or rejecting the lender's short sale
approval letter.
2) Per the Short Sale Addendum included with the offer, the short sale is not approved until it is accepted in
writing by the seller.
 If lender's letter does not provide for a seller signature, have seller sign and date letter if they accept
the terms.
3) If approved by seller, as per SSA, listing agent needs to provide a copy to buyer's agent and
escrow.
4) If any of the original terms (other than CBB) are revised by the Short Sale Approval Letter,
generate an appropriate counter offer to submit to the buyer for their consideration.
5) Once seller accepts and signs short sale lender approval and both buyer and seller agree to any
new terms of the offer, escrow can officially open.
NOTE ‐ The "expiration" date of the approval letter is for most lenders the date that they are to RECEIVE in house the proceeds of the transaction. This is not the close of escrow date. So read the letter carefully and ensure that the transaction closes in enough time for settlement to be issued, sent and received by seller's lender. 12
Acknowledgements
Appreciation is extended to the entire membership of the short sale work group committee for their
contributions in providing valuable information on the short sale process.
Special thanks go to:
Brent Consedine
David Bright, White and Bright Law Offices
Kim Carlson
Christine Clark
Diane Conaway
Tiffany Thielemann
Victoria Varnals
Peggy Yeomans
North San Diego County Association of REALTORS®
906 Sycamore Ave., #104
Vista, CA 92081
(760) 734-3971
www.nsdcar.com
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