I had a phone call today from a duplex owner in distress, wondering whether he still could do a short sale even though the sheriff’s sale had already taken place.
Of course, in Minnesota, the answer was yes.
This gentleman has six months before his redemption period ends; which is a long time in many respects. However, when it comes to short sales, it really isn’t.
Before a short sale can close successfully, several things need to happen as quickly as possible.
First, if the duplex is located in the cities of Minneapolis, St Paul, or any of the 12 metro suburbs that require a city housing inspection at or before the time the property goes on the market, that needs to be completed. Sorry, if your property is located in any of the cities where an inspection is a requirement, we can’t sell the place without it.
Next, the property needs to go on the market. And, as quickly as possible, we need to get an offer on it. That means pricing it to sell. While it would be easy to simply put it on the MLS for a dollar, the bank does want to see we made an effort to get it sold for something closer to market value. We can reduce the price from there.
Once we have an offer, we have to submit it, along with a whole ream of paper documenting the seller’s financial condition, including two years of tax statements, recent pay stubs and bank statements, or documentation that those things don’t exist.
Of course, since the banks are getting thousands of these short sales a month, they usually lose the three pounds of paperwork once or twice before finally acknowledging it’s all there.
Keep in mind if there’s one mortgage on the place, we only have to do this once. If there are two, we get to do it all twice.
Then we wait while the bank gets various real estate broker’s price opinions (BPOs) on the value of the duplex, as well as an appraisal, until finally, the bank assigns us a negotiator who will tell us whether or not they’ll accept the price the property’s under contract for.
If there’s a second mortgage involved, the negotiator for the first will also tell us how much, if any of the proceeds they’re willing to share with the second lien holder.
Once everything’s in order, we move toward closing on the property. If the buyer is paying in cash, this can happen in a matter of days. However, if he or she is getting a new mortgage, this can take another 30-45 days.
If you’re in that window of time after the sheriff’s sale and this sounds virtually impossible, don’t despair. Banks are aware that on average, they net tens of thousands of dollars more on a short sale than they do in a foreclosure.
And through persistent effort on our part, we may be able to get it done.
Remember, keeping a foreclosure off your record benefits you in so many ways that it’s absolutely worth the effort.