After closing hundreds of short sales, I came up with a list of tips to help you get your contract approved by the bank and help your escrow company when it comes time to getting it closed. I have numbered them in order of importance.
1. Put all contacts on your authorization form (agent, short sale coordinator, escrow company and title company). This will prevent escrow from having to send in additional authorizations in order to check on HUD approval and extensions, which may cause 24-48 hour delays.
2. Open escrow and title when you submit the short sale for approval and send seller’s statement of information form to title to be cleared. This will enable you to get more accurate estimates to the bank and be more likely to close as scheduled, knowing that there won’t be any judgments popping up against your seller after you have already received short sale approval and are ready to close.
3. If you have a short sale negotiator, make sure the fee is covered by agents or buyer. Most banks will not allow the seller to pay short sale negotiation nor transaction coordinating fees. However most banks will allow the buyer to get 3% toward a cost credit, so you can show the negotiating fee as a buyer’s cost and include it in the costs that are covered by the credit. Specify who will be paying the negotiator/transaction coordinator on MLS and the contract. On FHA loans, it is considered a “non-allowable” fee, therefore you will need to specify that the cost credit is for Buyer’s FHA Non-Allowable, Recurring and Non-Recurring Closing Costs. Due to banks having different guidelines, some lenders may not allow it to be covered by the cost credit, always check with buyer’s lender up front, so you can make adjustments early on in the transaction.
4. Verify if seller has been paying homeowner’s association dues. Many banks will not allow HOA liens (or balances in excess of a couple months) to be paid from the bank’s proceeds. It is best to provide this information to escrow, so we can provide a more accurate estimate to the bank. I have a Short Sale HUD Request form that I have created for your convenience. You can find it on our website at http://www.lodesescrow.com and our Facebook at Lodes Capital Escrow, Inc.(www.facebook.com/lodesescrow).
5. Order a termite report at seller’s expense (up front, not through escrow) prior to selling the home. Most banks won’t allow termite report/termite work to be paid from their proceeds (some will allow up to $500). Have the buyer approve the termite report outside of escrow. Once the termite report is given to escrow, we have to provide it to buyer’s lender and they most likely won’t allow any work to be waived at that time. Most FHA lenders will allow termite work to be waived as long as it is specified in the purchase contract as being waived (unless the appraisal shows termite damage, in which case they will require the work to be done at seller’s expense). Termite work is required on all VA loans.
6. Always read your short sale approval carefully. Some banks require estimated HUD’s with buyer and seller signatures at least 2 days prior to closing, some require Arm’s Length Affidavits to be signed and notarized by all parties (including seller, buyer, agents and sometimes escrow), some require the final HUD to be signed by buyer and seller. These are things that may cause your wire to be rejected if your escrow officer has not provided every detailed item exactly as the bank requires.
7. Banks rarely allow home warranty to be paid by seller, so you will save time by showing it as being paid by buyer on your counter offer (along with specifying Lodes Capital Escrow, Inc. as your escrow company).
8. Always plan to close at least 2 days prior to when your short sale expires and make sure buyer’s lender is aware that you are trying to close early. With the stringent underwriting guidelines these days, buyers’ lenders are cutting it close to the wire on getting loans funded. If you aim to close early, it will give you a buffer and keep you from having to request extensions.
9. Some banks don’t accept e-signatures. You may delay the processing of your short sale by providing e-signed contracts that will have to be re-signed prior to the bank reviewing your submission. They will also not accept e-signed authorizations and short sale affidavits. When in doubt, obtain live signatures.
I hope you have found this information helpful. Please let me know if I can assist you with your next transaction.
Sincerely,
Nikki Hall
Escrow Officer / Manager
Orange Community Escrow, Inc.
800 E. Dyer Rd.
Santa Ana, CA 92705
714-288-6300 ext 3304
Fax 714-409-3091
e-mail: nikki@orangece.com
LinkedIn: http://www.linkedin.com/in/nikkihall5
Facebook: Orange Community Escrow, Inc.
