So far in our Seller Series: Selling a Short Sale in Minnesota, we have discussed Reasons for a Minnesota Short Sale and The Minnesota Short Sale Listing Process. Now it is important to discuss the negotiation process once an offer is presented by a potential buyer. There are typically 6 stages of the negotiation process when a purchase agreement is written and the entire process can take anywhere from 2-12 months.
1. Seller Acceptance
The first part of the process is the seller being presented the purchase agreement offer by their Realtor. A good Realtor will go over the offering price, the closing date and any financial details about the buyer. For all of our short sale clients, we require that the buyer provides an earnest money check that is deposited within 3 days to our RE/MAX brokerage account. We also require a rock solid pre-approval letter and details about the buyer’s financial strength regarding the purchase of your home so that we are presenting the strongest possible offer to the bank. This also let us know the buyer is serious, is 100% invested in the deal and is willing to wait for the bank to make it’s decision.
2. Update Seller Documents
After the seller signs the purchase agreement and before we send the offer to the bank, we will ask our clients for updated bank statements, pay stubs and any other documents that are older than 2 months. We do this so we are presenting fresh information to the bank and not wasting time waiting for them to ask us for the updated information.
3. Presentation to the Bank
Once we have the signed purchase agreement, your updated documents and the buyer’s financial information we will submit the offer to the bank. At this time your case will be assigned a representative that will assist us in working out your potential short sale. Because we have successfully closed over 150+ short sales, we have established relationships with the larger banks and mortgage companies. This can be a huge help when it comes to negotiating and getting the deal to close.
Once the bank has your short sale package in their system, they will order a BPO or a Broker’s Price Opinion. Basically, an uninterested third party will come look at your house and give their opinion as to what they think your home is worth. The third party is usually a local Realtor or sometimes can be a Real Estate Appraiser. They will then report this information back to the bank. The bank is not obligated to share this number with you as a seller.
Once the BPO is completed the bank really has 3 options. They will either accept, reject or offer a counter offer to the original purchase agreement price. If they feel the price is inline with the BPO they will accept the offer. If they feel the price is way too low they will outright reject the offer. If they feel that the purchase price is too low they may offer the buyer a counter offer. It is then up to the buyer to accept the bank’s offer. During this time we are working closely with our bank representative to do what we can to get them to accept the offer.
6. The Closing
If all goes well and an offer is accepted a closing date will be set. At the closing you will sign documents to sell your house that are done in a typical sale plus addendums from the bank that are required with a short sale. The closing is usually an hour and is an easy process. Once the closing is over, the bank will close your mortgage and report the short sale to the credit bureaus.
In next week’s blog post we will explain what happens after the closing and include steps that you can do to improve your credit score after having a short sale report on your credit report. If you are considering selling your house on a Minnesota short sale and have more questions, please give us a call or send us an email for a free, confidential conversation.
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