The duties and responsibilities of REALTORS in providing their services to both buyers and sellers are established by a National Code of Ethics, the laws and regulations of the states and the courts. REALTORS have a duty to protect the confidential information of their clients. The seller must first consult with the REALTOR about his financial situation and what the REALTOR will be authorized to share with lenders, other brokers and the public.

After consultation of the seller’s financial condition and possible foreclosure timetable, the REALTOR should cover other sale options such as a loan modification or a deed in lieu that might be available given the particular seller situation. At that time the seller should consult legal and tax counsel for advice on potential liabilities for any deficiencies and on the best way to proceed. If a short sale is the most feasible solution, the following steps should be considered.

The Broker should prepare a careful Comparative Market Analysis using the most recent comparable sales. Consideration should also be given to comparable properties that are “for sale” to gage competition in the particular marketplace. Pricing should also take into consideration the time factor if foreclosure is near. All costs should be reflected including all back payments missed on existing liens and HOA dues. Most lenders will not disclose the final price they will accept until presented with a valid offer from a buyer.

Next, the seller will have to contact the lender to go over his situation and see if the lender or lenders will consider a short sale. The seller will normally have to present written information on his financial condition and some lenders will have a formal application or short sale package. This is done through the lenders' loss mitigation department. If the broker is going to speak to the lender he must have the seller’s permission. The broker should also provide his Market Analysis and any explanation to the lender to substantiate the asking price. Unless the lender refuses to consider a short sale you are now ready for the next step.

You can now proceed to list and market the property. The listing agreement should contain a provision that the sale is subject to the lender’s approval of the short sale offer without the lender requiring that the seller bring cash to the closing. Most Multiple Listing Services have rules on the disclosures required on short sales so that selling brokers are aware of the situation.

When an offer is presented that is acceptable to the seller, it should be signed by the seller and then presented to the lender. The offer should contain the provision that the contract is contingent upon lender’s approval of the short sale with no cash at closing required of the seller. In Colorado there is a Real Estate Commission approved “short sale addendum” that will be attached to the contract so that all parties are aware of the situation. Time is an important part of the equation as some lenders take weeks and even months to process an answer to the offer. Consideration of the foreclosure date can be critical and an extension may be needed to have sufficient time to close.

The final step will hopefully be a successful closing.
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What does the bank need to Net at closing?
(Based on the percentage of current market value)

FHA - 88% (1-30) days on market,
                    86% (31-60) days on market
                    84% (61+) days on market

VA - 88%

Conventional - 85% +/-

If you are a “Short Sale” buyer or seller contact Danyliw & Associates, REALTORS, the short sale experts. We offer you over 40 years real estate experience, covering the entire Denver Metro area, From Castle Rock to Brighton.