How Do Short Sales Work In Phoenix AZ?

how-short-sale-work-phoenix-azAs you can imagine, we get a lot of questions about how short sales work in Phoenix, AZ. With thousands of people selling their home using the short sale process, there is a lot of need for clarity and understanding.
We’re going to provide a brief overview describing how a short sale works.  We have numerous other short sale articles that offer more detail and thought we needed one that was more of an overview… kind of a just the facts Jack piece of journalism. Let’s get going with the How Does A Short Sale Work article.

A short sale starts with a home owner, who is upside down in their home, choosing to short sale their home. Ideally, the home owner makes this decision after doing the following:

  • He or she contacts a short sale knowledgeable Realtor to determine the approximate current market value of their home. This will tell them if they are really upside down and by how much.
  • The home owner meets with a short sale knowledgeable attorney to review options and determine their best course of action.
  • Most people should also meet with a talented tax attorney to determine if there are any negative tax consequences to selling their home by short sale.
  • If preserving your credit score is important, some have found working with a credit repair specialist before, during and after the short sale is wise.

Let’s assume selling the house or condo by short sale is in the homeowner’s best interest, what’s next? Two things happen at the same time:

  1. The homeowner needs to get all the documents together their lender/s will require to process a short sale. This is commonly referred to as the “short sale packet.” If you are working with a professional negotiator, they will help you put this together.
  2. You’ll need to work with your Realtor to get your home ready to go on the market. FYI:  Some people believe that since they are selling their home by short sale they really don’t have to do anything to prep the home for sale. In truth, you still need to find a home buyer who is willing to pay a fair market value price for the home. A top tier Realtor can help determine what things will make a difference without you having to come out of pocket much.  See our article on staging a home to sell for more on this subject.

The next step is to put the home on the market and find a qualified buyer. This is very similar to selling a non-short sale home or condo. Another FYI: Just because it is a short sale doesn’t mean it is sold at bargain pricing. The lender who must approve the short sale will expect the sales price to be very close to current market value. Thus, it is not in the home seller’s best interest to accept a low ball offer as the lender could deny the deal or ask the home owner to kick in extra money to bring make the sale more palatable.

Once a meeting of the minds has happened between a buyer and seller (an accepted purchase contract), the contact and short sale packet are submitted to the lender for approval. FYI: Some lenders will have the homeowner submit the short sale packet in advance of putting the home on the market and finding a buyer. This is a lender dependent variable.

The lender will order an appraisal or what is called a BPO (broker price opinion) during the approval process. They simply want to verify that the sales price is in line with fair market value. Remember, the home owner is asking the lender to take a loss by accepting the sale as payoff of the mortgage and they will want to minimize this loss.

If the short sale is approved, the lender will send an approval letter to the home owner. This letter often has conditions and we STRONGLY RECOMMEND THE HOME OWNER HAS THE SHORT SALE APPROVAL LETTER REVEIWED BY THEIR ATTORNEY BEFORE SIGNING IT.  If the approval letter is acceptable, the homeowner will have it notarized and sent back to the lender.

Once the signed approval has been completed, the sale of the home moves forward. The buyer will conduct his or her home inspection and the process will be much like the sale of any home. IMPORTANT FYI: In most cases the lender will expect the sale to be completed in about 30 days. This mandates that both the buyer and seller be ready to move quickly. We advise getting all your ducks in a row while the lender is reviewing the short sale. Homeowners may want to start packing and planning on where they will live. Home buyers need to have their new loan in place and all required documents into their lender. Time will be of the essence!

That pretty much sums up the basics of how a short sale works in Arizona. Due to the brevity of the article, we have not included every possible variable that may or may not occur. However, this should give you a basic understanding of the short sale process.

We want to thank you for turning to for your downtown and north central Phoenix short sale questions and needs… We truly do appreciate it! If you need professional help with your short sale, we’d be honored to be part of your get-it-done team.

The Urban Team at Realty Executives
7600 N. 16th Street, Suite 100
Phoenix, AZ  85020

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The Urban Team at Realty Executives

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