Ten Tips for Successful Short Sale Negotiations

I have heard a lot of things from the short sale gurus, but some of the wildest stuff came from those who share their secrets to negotiating short sale approvals with loss mitigation specialists. There are secret spreadsheets, special language to use for effortless approval, inside bank contacts, and on and on. It’s almost all garbage.

After surviving hundreds of short sale negotiations, my colleagues and I have found that there are several components to getting a short sale approved - and none of them involve immediate acceptance. It’s about knowing what challenges to expect and implementing a few strategies to make it easier to meet them.

You see, the best way to get through the process successfully is to understand the lender’s goals and how they view the whole process. They know that they’re going to lose money if the house goes into foreclosure. They’re going to spend thousands of dollars on attorney fees just to try to collect the debt. Add the lost interest income, negative escrow, appraisal fees, and realtor fees once the property becomes bank owned, and you can see how this can add up. And that doesn’t even include the property maintenance that they’re obligated to pay for until the REO is resold.

So, straight from real-life experience – without all the hype and garbage – here is my short list of tips for anyone who wants to specialize in short sale negotiations.

1) Submit a complete short sale package and make sure it gets assigned to a mitigator quickly. If it doesn’t get assigned, the offer will never be seen. Make sure to follow up and see if the lender has received your offer. Lenders lose short sale packages all the time or claim they never received them. Don’t let this happen to you.

2) Be persistent. Lenders are swamped with foreclosures. They have trouble keeping up with all the short sale cases they are working. The only way to push things forward is to make sure you are pleasantly persistent. Don’t call every day. Call every other day or every third day. When you call, don’t leave a message every single time and make your first impression as a pest. Just hang up and call back.

3) Find out who owns the loan (FNMA, FDMC, FHA, VA, conventional). Make sure to ask the mitigator who owns the loan and record this in your notes. Trust me - it will make negotiating much easier. Each loan investor has their own idea of what they will and won’t accept from a short sale.

4) Pleasantly explain your offer to the loss mitigator and push to have the lender order a new interior appraisal or BPO immediately.

5) Conduct an effective BPO.

6) Make sure you know what’s on title by pulling a title report after the BPO has been done. You don’t want to get to closing and find liens you didn’t know about.

7) Ask the bank about the number for the BPO. This is self-explanatory. Just ask. Sometimes they won’t tell you, but sometimes they will. And then you know you’ll pay about 90 percent of that number.

8) If the bank will not tell you the BPO, you have to get them to make a counteroffer. (Most of the time, their counteroffer equals the BPO figure anyway.)

9) Submit your own counteroffers with additional proof to validate your offer (days on market from the MLS listing, repair estimates, low comps, negative articles on the area or city).

10) Make sure the lender knows you’re a cash buyer and can close quickly.

There’s no magic spreadsheet to use, and you don’t even have to infiltrate the loss mitigation department to get this done. Be prepared, be pleasant, and be proactive. You’ll be much more likely to get what you want.

Short sales are not a lender’s first choice when dealing with a property in default, but they’re not the last resort, either. Lenders are going to lose money when a house goes into foreclosure. It’s up to you to make them an offer which proves to the loss mitigator that they won’t lose as much money if they work with you.