Phase 1: Document Collection
In this stage, the lender or servicer evaluates whether to consider a borrower for a short
sale. The lender requests the following documents:
documents they request. The lender will not proceed with the file unless they have a
complete, up-to-date package.
Phase 2: Negotiation
In this stage, the lender assigns a negotiator to review the file. The negotiator will
coordinate with the seller and their representative in scheduling a Broker’s Price
Opinion (BPO) to determine the current value of the property.
The lender will usually accept an offer that’s within 90-95% of the property’s fair market
value. If the lender receives an offer that is close to fair market value and other
requirements are met, the lender’s negotiator will send the short sale package to the
decision-maker. The lender may take up to 30 days to make a final decision. Once a
decision has been reached, the lender’s negotiator will inform the seller(s) and their
If the short sale is approved, the lender will issue an approval letter that outlines the
settlement date as well as the costs that the lender will pay. Such costs include real
estate commissions, property taxes, attorney fees, title insurance, etc. If the seller
agrees with the terms of the approval letter, the short sale advances to the Closing
Phase 3: Closing
In the closing phase, the buyer and seller must make the necessary arrangements to
complete the sale of the property. Both parties must follow the terms and conditions of
the short sale approval letter. If the lender states that the settlement must happen
within 30 days, then the buyer must be prepared to close within that time frame or risk
having the deal fall apart.
In most short sale deals, there are still expenses that must be paid at settlement but will
not be allowed to be paid out of the proceeds of the sale. Since it’s common for the final
numbers to be slightly off from the approved costs in the short sale approval letter, I
encourage the buyer, agents and any other participants to be prepared to make some
last minute contributions for the short sale to close on time.
By Iverem “Eva” Rose