Buyer’s Agents Guide
to the Short Sale Process

One of the biggest misconceptions about short sales is that the lender is approving or denying specific contract terms.

In reality, the lender’s primary concern is the amount of money they will receive at closing.

The lender is already agreeing to accept less than what is owed on the loan. Because of that, every dollar matters.

The lender is not usually saying:

“We don’t allow home warranties.”

“We don’t allow repair credits.”

“We don’t allow seller concessions.”

Instead, what the lender is saying is:

“If we pay for those items, the amount we receive at closing falls below what we are willing to accept.”

For example, if the lender determines they need $250,000 net from the sale, it does not matter whether the reduction comes from a lower sales price, seller-paid closing costs, repair credits, a home warranty, or some combination of those items.

All of those expenses reduce the lender’s net proceeds.

Think of the lender as focusing on one number: the final amount they receive after all costs and expenses are deducted.

This is why a lender may have the seller counter an offer, reducing concessions, or requesting changes to the contract. They are usually not objecting to the specific item itself. They are simply trying to reach the net payoff amount required for approval.

Understanding this concept helps buyer’s agents explain the process to their buyers and prevents many of the frustrations that occur during short sale negotiations.

This is why a lender may have the seller counter an offer, reducing concessions, or requesting changes to the contract. They are usually not objecting to the specific item itself. They are simply trying to reach the net payoff amount required for approval.

Understanding this concept helps buyer’s agents explain the process to their buyers and prevents many of the frustrations that occur during short sale negotiations.

Short sales often offer:

• Less competition from other buyers
• Highly Motivated sellers
• Motivated lenders
• Often better values and better pricing
• Opportunities to purchase homes that may not otherwise be available

Many buyers find that waiting a few extra weeks is worth it if they get the right home at the right price.

Every file is different, but because of technology and more aggressive lender policies, most short sales today are approved much faster than they were during the last housing downturn.

Typical timelines are:

3 to 6 weeks

for lender review and approval

15 to 20 days

to close after approval

Some files move faster. Some take longer.

Much depends on how complete the short sale package is and how quickly the lender completes its review.

Please ask listing agent the following questions:

• Has the short sale package been submitted?
• Is the package complete?
• Has the lender acknowledged receipt?
• Has a negotiator been assigned?
• Has a valuation already been ordered?

The more complete the file, the faster the process usually moves.

The lender must review the file and determine whether the offer represents best net to them.

To do this, the lender will often order:

• A Broker Price Opinion (BPO)
• An appraisal
• Other valuation reviews

The lender is simply confirming that the offer reflects a fair market value before approving the transaction.

This process typically adds 7-10 days to the review period.

Many buyers assume that because the seller is experiencing financial hardship, they can submit an extremely low offer.

Unfortunately, that rarely works.

The seller is not making the final decision.

The lender is indirectly by approving their loan payoff.

The lender will independently determine the property’s value.

Reasonable offers that reflect market conditions are much more likely to receive approval.

One of the most important things a buyer’s agent can do is set expectations early.

Please explain to your buyer:

• The lender must approve the net on the sale as per discounted loan payoff.
• Approval typically takes 3-6 weeks.
• There may be a counter from seller as seller is negotiating lender payoff.
• Closing dates may change.
• Additional documents may be requested.

Most buyers are perfectly comfortable with the process when they understand it upfront.

Buyers may be required to sign certain documents during the process.

These may include:

The buyer confirms:

• They are not related to the seller.
• They do not have a business relationship with the seller.
• There are no side agreements.
• No money is changing hands outside of closing.

These documents are normal and help prevent fraud.

Every transaction is different.

Before ordering inspections, please discuss timing with your buyer and lender.

Most short sales are sold “as-is.”

The lender may indirectly limit repairs, credits, or concessions if they impact the net.

Your buyer should understand this before submitting an offer.

Typical concessions (i.e. closing costs credits) are generally allowed – the lender is not directly approving the terms of the deal they are approving the net that they will receive.

Asking for repairs to be made by the seller or prior to close is not typically feasible as the seller is already in financial hardship and likely unable to do so – so always assume the property is sold as is.

In simple terms – keep the offer as clean as possible.

Normal contingencies such as loan, title, inspection, are usually fine – “subject to’s” such as to the sale of another property are not.

Many lenders process short sales through online systems such as Equator.

Offers, documents, and approvals are often submitted electronically.

You may be asked to upload documents through an online platform.

This is normal and helps speed up the process.

During the short sale approval process – the majority of communication will be with the listing agent, seller and mortgage holder. You (and your buyer) must give them all time to do their jobs.

Everyone understands that buyers become excited when they find the right home.

Let them know they will have to be patient. Some lender approvals move slower than others.

If you do not hear from the listing agent, it is usually because they have no new information for you – please do not call the listing agent (or the lender) constantly as it just slows the process down.

Explain to your buyer that everyone wants this deal approved and closed just as much as they do and most are very good about staying on top of things.

Most listing agents will provide weekly updates or immediately whenever new information becomes available.

If you clearly explain the process and timelines to your buyer before they make their offer – you will find you have much easier time and a smoother transaction.