I have a friend who is a very intelligent person, highly organized, and very resourceful. He decided to purchase a short sale utilizing the listing agent of the home. He has been kind enough to detail out his experience and has allowed me to share step by step here. His experience is not unlike many short sales I have completed with clients. Whether I represent the buyer or the seller, I am always amazed at how each lender handles the short sale process. I have sat down with clients and went on and on about the process and how they should be prepared to wait for months for an outcome and low and behold, we receive approval in 10 days and close in 40 days. They are very unpredictable transactions. If you are considering buying a short sale, take a look at the step by step process this buyer went through to purchase his home. Knowing the pit falls may help you.
1. Made offer of $149K (2-26-2009)
2. Applied for FHA loan
3. Informed that property was going to auction.
4. Informed that property won’t go to auction; offer is being reviewed.
5. Wait for Aurora’s appraisal
6. Lender -Aurora counter offered $152,750.00
7. Counter offer accepted.
8. Rate lock on loan expires. Extension acquired.
9. Move out of apartment. Landlord illegally keeps deposit.
10. FHA loan denied based on insufficient HOA reserves.
11. Apply for conventional loan.
12. Mortgage Insurance company counter offers seller w/ promissory note.
13. Seller rejects promissory note. MI company denies claim.
14. Lender-Aurora sends property to foreclosure department.
15. MI company offers to pay claim less $9000.
16. Aurora asks for another $9000.
17. Agree to another $9000.
18. Informed that I have insufficient funds to close, because they never told me the closing costs.
19. Rate lock expires. Extension Acquired.
20. Waiting for final approval from Aurora.
21. Approval submitted to management by floor manager. Expected in “24-48 hrs”
22. Asset manager sends approval but for the wrong property.
23. Obtain additional rate extension.
24. Received approval for right property but with the wrong price (off by $18k).
25. Received approval for right property but with wrong price (off by $9k)
26. Approval submitted again to floor manager. Expected in “24-48 hrs”. (7-20-09)
27. Rate lock expires. Extension acquired.
28. Landlords don’t respond to Verification of Residency. B of A asks for canceled checks from all rent and utility payments in the past year. I provide the confirmation numbers of online B of A payments and transfers, and B of A rejects these as proof of payment.
29. Received new approval letter from Aurora (correct so far; expires in 1 week). Missing final approval on loan because of lack of VOR.
30. Bank waives VOR requirement.
31. Documents sent to title.
32. Closing scheduled for 8AM 7/24/09. (Not out of woods yet; still need BofA to fund loan after closing, before 7/29/09 when Aurora approval expires).
33. Signing canceled because final sales price from Aurora does not match the form of the final sales price from BofA. Will have to check with BofA to see if docs will have to be rewritten.
34. B of A underwriting requires an additional signed addendum changing the sales price to $152,750.00 with an additional credit to the seller of $9000 for closing costs.
35. Rate lock extension acquired. Extension from Aurora acquired.
36. SIGNED at title company!!!!!!!!!! (cross your fingers the seller doesn’t die before signing) (7-27-09)
* Last 2 weeks Paystubs
* Last 2 years W-2’s
* Proof of college enrollment
* Verification of Employment/Income (faxed by work)
* Verification of Employment (verbal)
* Proof of 401(k) balances
* Last 2 months bank statements for all accounts
* Last 2 years of landlord info (Names, Phone numbers, addresses)
* Explanation of why Bank account is in Georgia
* Signed Gift Letter
* Proof that Gift Letter related funds have (1) left the gifter account and (2) entered giftee account
* Checks used to deposit Gift Letter funds
* Earnest Deposit (Escrow receipt)
* Credit Score
* HOA survey information
* Signed contract
* Signed contract addendum
* proof of homeowner’s insurance
* Records of all rent and utility payments in the past year
Information they tried to deny me:
* B of A’s appraisal (got it; it was bullshit)
* Closing costs