By and through its affiliate, NOVA Negotiations, LLC, Universal Title is undertaking the processing and negotiation of short sale contracts. This page should help to better explain the short sale process and our policies regarding the negotiation of short sale contracts.
What is a Short Sale?
A short sale is when there is not enough equity in a property to pay standard settlement charges, including real estate commissions and payoff the loans that are on the property. As a result of the declining real estate market over the last three years, it is not an uncommon occurrence that a property would be in this situation. As property values have declined, it is becoming more routine for mortgage lenders to accept less money than what is owed on their loan in exchange for the release of the lien on the property.
What if the property is also being foreclosed?
All parties must be aware that many properties trying to be sold through a short sale also have pending foreclosures and there is no guarantee that the lender will stop the foreclosure while the short sale is being processed. As the scheduled foreclosure date approaches NOVA Negotiations will request that the foreclosure be re-scheduled or postponed indefinitely and although most lenders will comply with this request there are some lenders that will not stop a foreclosure for any reason, including an ongoing short sale negotiation.
What should be the listing price of the property?
Although the mortgage lenders will not help you set a price at which to list the property, the mortgage lender will expect that the property be sold at a fair market value and will conduct their own appraisal of the property after they receive the contract. The property should be listed at the price that the listing agent and seller feel is the fair market value of the property. If the property sits on the market for an extended period of time without any interest, then the listing price can be dropped and the listing history of the property can be provided to the lender to explain the reduction. If you receive an offer that is drastically below the market value of the property, the contract and short sale package can still be submitted to the lender but the property should continued to be actively listed in hopes of receiving a better offer that the lender is more likely to accept.
What do Universal Title and NOVA Negotiations charge for the Short Sale negotiation?
There is no upfront fee collected from either the seller or the real estate agent. Additionally, we do not require the real estate agent contribute any part of their commission towards the negotiation fees. NOVA Negotiations will add a negotiation fee to the Draft HUD-1 Settlement Statement sent to the mortgage lender(s) but will only collect fees for our negotiation services as can be collected on the HUD-1 and approved by the lender(s) being paid off.
What do the lenders require for a Short Sale?
Mortgage lenders will not begin the short sale process until there is a contract on the property. When a contract is written on this property, a short sale “package” will be submitted to the lender(s) who have liens on the property. You and your client will need to provide us with most of the documents for this package, including (1) the contract, (2) the listing agreement, (3) a hardship letter explaining your client’s necessity for selling the property in a short sale, (4) your client’s recent bank statements (usually two months), (5) recent paystubs (usually two pay periods), and (5) recent tax returns (usually two years). With this package, NOVA Negotiations will submit a draft HUD-1. Because the lender(s) will require a draft HUD-1 Settlement Statement at the time of the submission of the short sale package to the lenders, NOVA Negotiations, LLC recommends the use of Universal Title as the settlement company for both buyer and seller. Short sale lenders often require multiple changes to the Draft HUD-1 Settlement Statement throughout the short sale negotiation process and by using Universal Title as the settlement company for both buyer and seller there will be no delays in producing and submitting the revised settlement statements. If the buyer opts to use their own settlement company, NOVA Negotiations, LLC cannot guarantee the timely submission of the Draft HUD Settlement Statement or any required revisions as the production of those settlement statements will require additional coordination with and will be the responsibility of the buyer’s settlement company.
What settlement fees will the lender approve?
Although there is not a standardized set of rules for what lenders will and will not approve on the HUD-1 Settlement Statement, most lenders will approve the payment of (1) real estate commission up to 5% if two different brokers and 4% if a single broker is involved, (2) standard settlement fees, (3) recordation taxes, (4) real estate tax and homeowners association prorations, and (5) limited seller closing cost contributions towards buyer’s settlement costs. Lenders may restrict seller closing cost contributions to 6% or less and some lenders will only allow closing cost contributions if the buyer is obtaining a FHA loan. Although all contractual fees will be included on the initial draft of the HUD-1 Settlement Statement, many lenders will not approve the payment of a Home Warranty, Termite Inspection, past due Homeowners Association dues, listing real estate agent transaction/administration fee or repair items on the seller’s side of the HUD-1 Settlement Statement.
How long does the short sale process take?
From the time the contract and complete financial short sale package is submitted to the lender, approval can take anywhere from 30 days to 12 months. The approval process is highly dependent on what lender is servicing the mortgage, whether or not there is an investor that must also approve the transaction and whether there are one or two lenders with whom negotiations must be made. Some lenders are unwilling to substitute the approval of one buyer’s contract for another despite contract terms being exactly the same (or even better) so if a buyer backs out midway through the short sale process, the timeframe for the approval process could be lengthened.
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