Negotiating a short sale can be tricky if you don’t know the ins and outs. It is smart to discuss the short sell process with your attorney first to make sure that is the best option for you. Also, by following these simple steps, you have a much higher rate of success of getting your short sale approved.

Step 1
Find out from the lender if the property qualifies for a short sale. Depending on the lender or loan servicer, they will probably need the following documentation to determine if the property qualifies:

• Hardship letter from the seller.
• Authorization letter authorizing a third party to contact and negotiate with the lender.
• Last two paycheck stubs.
• Most recent bank statement.
• 1099 for W’2 forms for the last two years.
• Last two year’s income tax returns.
• Comparative market analysis showing the most recent sales in the area. This can be prepared by a Realtor.

Your attorney, third party negotiator such as a title company or Realtor can submit this information to your lender on your behalf if you sign the authorization letter naming them as your authorized representative.

Step 2
List the property for sale with a local Realtor who will market the property to potential buyers. This is really important because you need the most exposure possible for your home to sell. Be sure to list the home at or slightly below market value so that you will attract a buyer quickly. Another smart tactic is to offer a higher commission than 6% to get the brokers to show the property to their buyers. The lender will have to ultimately approve the commission anyway because they are the one that will be paying it, but it’s a good strategy to get more activity on the property. Your Realtor will advertise in the MLS that the property is a short sale subject to third party lender approval and that the commissions may be reduced so the brokers and the buyers are aware of the short sale, and there is no confusion later on.

Since you owe more on the property than what it is worth, you will not get any proceeds out of the sale anyway so don’t list the property too high. It will just sit on the market, and you will lose valuable time. Your lender will also get a broker price opinion from local Realtors as to what they think the home is worth so most likely the lenders will be reviewing the same comparable sales that you did in determining your list price.

Step 3
Submit your short sale package listed above together with a copy of the purchase and sale agreement and any brokerage listing agreement to the lender for their approval. The lender will pay all the seller’s closing costs, back taxes and HOA or Condo Association dues and the broker’s commission.

Step 4
Follow up with the lender to make sure they received the short sale package, and keep calling every day until a negotiator is assigned. This way you keep reminding them you are out there and you want to sell the house and move on. Today, more than ever lenders want to work with you and avoid a foreclosure if at all possible. Foreclosures on average cost lenders $50,000 per foreclosure.

Step 5
Negotiate the offer with the lender. It may take a few rounds of countering back and forth with the buyer and the lender before the lender and buyer come to terms. Sometimes, short sales fall through because the lender is not willing to accept the buyer’s offer, or the buyer’s get frustrated because the process takes so long and they find another property. It is important that your Realtor explain the short sale process to the buyer thoroughly so they understand that the process can take as long as 90 days or longer. Sometimes it is best to work with an investor on short sales because they are not in a hurry, as they are not intending on living at the property.

Step 6
If the offer is not accepted, then you will need to find another buyer and start the process again. However, by this time your lender will have pre-approved a list price which is acceptable to them so that you can offer the home to sale to the next buyer at the pre-negotiated price. This speeds up the process considerably if you have the short sale pre-approved first before putting the house on the market. Although sometimes the borrower does not have enough time to go through the pre-approval process first and then list the home for sale. That is why it is so important to start the process sooner than later before time runs out, you are in default, and the lender starts foreclosure proceedings against you.

As always, thanks for reading this post and if you enjoyed it be sure to comment below. Also, check out our FREE 2009 Loan Modification Guide: Saving Your Home From Foreclosure.