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South Lake Tahoe Short Sales: A Primer for Investors (Pt Four)

February 21st, 2010 categories: For Buyers, For Sellers, Foreclosures, Lake Tahoe Real Estate, short sales, South Lake Tahoe Statistics, South Lake Tahoe, CA

South Lake Tahoe Short Sales: The Evaluation The Short Sale Package includes documents on property value… and all of the reasons the owner can't pay the loan.

This is the fourth of an eight-part series on short sales. Think of it as coming from the point of view of the home buyer / investor, although the short sale process is the same for the South Lake Tahoe seller as well.

The definition of a short sale is simply this: it is the sale of real property at a price that is below the amount owned on the property.

It should be noted to all potential South Lake Tahoe buyers that the short sale process varies somewhat from lender to lender, sometimes substantially; that a successful short sale purchase can be a tedious, uncertain, time consuming process. Not all offers on short sale properties meet with success, to be certain, and it is not uncommon here in South Lake Tahoe to find multiple offers on attractive, reasonably priced short sale homes.

(current South Lake Tahoe, CA short sale summary and statistics here)

Step One: The Property Evaluation (here)
Step Two: The Short Sale Application (here)
Step Three: The Hardship Letter (here)
Step Five: The Offer and Purchase Agreement (here)
Step Six: The Lender's Short Sale Decision (here)
Step Seven: Negotiating with the Lender (here)
Step Eight: The Closing (here)

Part Four : The Short Sale Package

The step prior to this one, the Hardship Letter, is central to the Short Sale Package. Think of it as the spine, if you will, to an owner's short sale story. The package then is a more thorough and detailed documentation of financial data. Its purpose is compelling evidence that a short sale is the right solution for the lender.

The items an owner includes in the short sale package will ultimately have a great deal of influence on the decision of the lender about whether to approve a short sale or not, and for the amount they will accept.

An Appraisal?
As such, also included at this stage of the process are documents designed to help the lender understand the value of the property in today's South Lake Tahoe real estate market. One might think that the lender already has access to such information, or has independently ordered it, but not necessarily so. The lender may look at BPO's (broker or agent price opinions) and / or an actual appraisal as a guide to arrive at a short sale price they will ultimately accept.

Though some owners may not wish to incur the minimal cost of an appraisal, and few short sellers actually provide it, a certified appraisal can be exceptionally helpful to the lender. It both establishes the seriousness of the owner's intent, and is a professional, bankable document that can help set a positive relationship with the lender from the get go.

Every point in a short sale package matters Whether one is the owner, a real estate agent, or the investor buyer trying to purchase a short sale home, everyone involved should want to provide any and all financial positions, points of view and documents that could persuade the lender to acceptance. Such things might include:

Financial statements
Pay stubs
Bank statements
Hospital bills
Divorce decrees
Credit reports
Tax returns
Job termination document(s)
Recent, comparable sales
Current market absorption rates

Think of the short sale package is nothing more than the opposite of a loan package. One contains all the reasons why someone should make a loan, and the other is every reason why it can't be paid. The short sale package is therefore nothing more than proof of an impossible situation.

If the lender accepts that proof, and sees that a short sale is their best opportunity, then the owner is well on their way.

A Home Inspection?
There is one other piece of financial information that is worthy of discussion. And this can also help the seller get short sale approval, or the buyer get acceptance of their offer. It's like using an appraisal as leverage in it's rarity, but a home inspection can have a real place in the strategic mix.

Some lenders, if they foreclose, will have the home cleaned up and prepared for sale. This includes repairs for all issues that would negatively affect the property's value. A home inspection documents the costs of repairs and reconditioning. This benefits the owner because all additional costs to a lender fortifies the case for a short sale, and conversely the home inspection also helps the buyer's position as well, particularly if the buyer is willing to purchase the property without having the repairs made (even if the lender puts the property up for sale "as-is", the cost of repairs, actual or assumed, is always part of a negotiation).

Step One: The Property Evaluation (here)
Step Two: The Short Sale Application (here)
Step Three: The Hardship Letter (here)
Step Five: The Offer and Purchase Agreement (here)
Step Six: The Lender's Short Sale Decision (here)
Step Seven: Negotiating with the Lender (here)
Step Eight: The Closing (here)