The Foreclosure laws are ever changing in Minnesota. It is important that you hire a real estate agent that has a great understanding of the foreclosure process. The Real Estate agent you hire will ultimately be the deciding factor if you get the short sale approved. Here are a few bullet points you must ask your potential Realtor:

• How long have you been doing short sales?

• What is your conversion rate for short sales?

• Who does your negotiating? Successful Real Estate Agents do their own negotiations. Be weary of a Real Estate Agent if they tell you they have a third party company do their negotiations!

• Make sure they have experience with the bank you have your mortgage(s) with. Successful short sale agents will have worked with every bank. Most likely they will have a contact at the bank that will give your short sale a competitive advantage.

Our specialized group of Edina Realty short sale agents will give you the greatest chance of completing your short sale. Give us a call today!

In reality, the list price of the short sale may not be the actual price that the bank accepts. It could be so high that no one would offer to buy, or it could be so low that banks cannot accept. Remember that the bank has the right to approve or disapprove the short sale because they get to receive an amount that is less than the mortgage due of the seller.

So what are the factors that cause the bank to reject a short sale?

One is that the price of a short sale is too low. In negotiating for a short sale, banks require appraisals and sometimes BPO. They also require a comparative market analysis so they could see if the price of the offer can be justified. If they find out that foreclosing the property is more financially sound, they would reject the short sale. The seller or short sale agent can argue through comparable sales to prove that a short sale is more valuable to the bank than foreclosure.

Another reason for rejection is an incomplete package for short sales. If the documents are not complete, the short sale may not be approved. In some cases, some documents may even be misplaced by the bank itself. What the seller or agent should do is always keep a second copy and lists of documents that they submitted so that they can provide the lacking documents required.

If a seller does not qualify for Minnesota short sales, the bank would reject the short sale. Disqualification may be due to invalid reason reflected in the hardship letter and availability of assets that can be used for a repayment plan. It is important that the seller’s hardship letter will show valid reasons such as job loss, death of a family member, severe sickness or accident. There should also be a negative value on their profit and loss statement or monthly budget.

Finally, the buyer’s disqualification can be a reason for rejecting the short sale. An evaluation of the buyer’s credit history, debt ratio, years on the job and other criteria will determine if the buyer is qualified for the short sale. The buyer has to submit a loan preapproval letter to gain credibility to the seller’s bank.

The approval of Minnesota short sales usually takes such a long time that manybuyers give up. The reason is that lenders do not usually approve a short sale without receiving an offer from buyers. For this reason, some agents reflect a low price in the comparable sales just to attract offers. However, banks usually accept a price higher than what is listed because sellers pick the higher priced offer.

 There are several steps taken before the actual approval of a short sale. Here are the steps:

1. Minnesota short sale agent lists the sale.
2. Agent receives from the seller the documents required by the lender.
3. Buyer submits an offer to the lender for approval.
4. The listing agent sends the package, including the accepted offer and HUD, of the seller to the bank.
5. Buyer waits on approval, which can last for more than a month.
6. Once approved, the agent of the seller is informed and will in turn inform the agent of the buyer.
7. If the buyer finds another property during the waiting period, the buyer’s agent will inform the listing agent.
8. Transaction will then be cancelled by the buyer.
9. Listing agent will have no choice but to put the property back to market as an approved short sale.

Typically, this is how a short sale is approved. In most cases, Minnesota short sale properties are offered to the market while they are in the second step as an unapproved short sale.  The approved short sales are those that reached the ninth step specified above.

There are buyers that still cancel the approved short sale even when they do not wait. Other reasons for cancellation include:

1. Low appraisal, possibly due to HVCC, and bank refuses to approve lower sales price.
2. Buyer is not qualified for loan or is not willing to comply with the funding conditions of the lender.
3. The property requires several repairs but the bank won’t pay for the cost of repairs.

Typically, the offer from the buyer should match the terms of the approval letter of the short sale. Once it matches, the short sale is considered closed.

When the bank approves of your short sale, they agree on receiving payment that is less than the amount due. This means that they are giving discounted payoffs on delinquent mortgages. Because of such arrangement, not all lenders may approve of short sales, especially if foreclosure is more financially beneficial. In addition, not all properties and sellers are qualified for the sale. Dealing with this kind of real estate requires the right knowledge and understanding so one must ask advice from legal, accountants or short sale agents before deciding on a short sale.

Although lenders may have different requirements and demands when it comes to a short sale transaction, you need to have a basic idea of what they are looking for. Below is the list of things that you would need to negotiate a short sale.

1. Name of the person responsible for short sale. Call the department that handles short sale and get the name of the supervisor or the person that is capable of decision-making.
2. Authorization letter for disclosure of information. You may need the help of Minnesota short sale agent who will do the hard work on your behalf. Before lenders give the details about your nearly-foreclosed property to the agent, you need to give them permission to discuss the details about the property to your agent. The letter of authorization should contain the property address, loan reference, name of mortgagee (that’s you), date of the letter, agent’s name and contact details.
3. Estimated closing statement. This shows the sales price and its related costs, amount of unpaid loan, outstanding payments and all late fees of the property. It is in this part where you need the knowledge of your Minnesota short sale agent or lawyer. When the computation shows that you receive cash at the end, you most likely do not need the short sale.
4. Letter of hardship. The more difficult your financial situation, the better. This letter serves as your plea of why your lender should accept payment that is less than the total due. Valid reasons include job loss, death of family members, divorce or severe illness.
5. Records of assets and other income. Lenders want proof that you are incapable of paying your debt so they want to know your other assets and income. They need to know if you have saving accounts, stocks, negotiable instruments and properties before they decide to “forgive” your delinquency. They would even require that you explain your unaccountable deposits on your bank statement so they can determine if deposits are still possible or not.
6. Comparative market analysis. This can be prepared by your short sale agent as this shows the prices of similar homes that are active on the market, are on pending sales and sold within the past 6 months.
7. Copy of the purchase and listing agreement. Lenders need to have a copy of the purchase and listing agreement. It is possible that lenders will not pay certain items like termite inspections and home protection plan or they may renegotiate commissions as opposed to what is written on the agreement.

Now after examining all these things, it is up to your lender to approve your short sale. Once approved, they may or may not reflect the short sale in your credit report.