The Short Sale Closing Process: What You Need to Know
A short sale can be an incredible way to save money on a real estate transaction, however, the closing process can be complex. In this article, we review a few of the steps that residential and commercial property buyers should know before signing the papers on a short sale.
Good Faith Estimate and Short Sale Approval Letter
One of the first steps to closing a short sale is to examine your good faith estimate, a document from your lender which explains all the costs of your potential mortgage. At this point, you've already agreed on a specific set of closing costs with your seller-- now, you have to make sure that the costs you've agreed upon are matched in the seller's short sale approval letter, a document from the seller's bank.
Check for Shortages Before Continuing The Sale
While you might expect there to be no differences between your good faith estimate and your seller's short sale approval letter, there can often be a large price gap between the two-- and it's your responsibility to figure out who will pay it. In some cases, a short sale may require the approval of two lenders (if the seller has two loans on their home), so you'll have to make sure that you've received documentation from both of them.
Sign a Purchase Contract and Begin Title Verification
After a purchase contract has been signed, you'll want to work with your title company to begin the title search and verification process. During a title search, your title company will look through all applicable local, state, and federal records to make sure there are no title issues, defects, or outstanding liens on the property. If the title search comes back clear, then the title company with be able to issue you both a lender's and an owner's title insurance policy.
Be Willing to Wait for the Sale to Close
Unfortunately, the short sale process can be a tricky one. Those in the know understand that a variety of things can pop up that can significantly slow down the process, such as a buyer noticing phyiscial issues with a property that the seller or bank is unlikely to want to repair. Since most short sale properties are sold as-is, that might be something the buyer will have to deal with on their own. However, since they could be getting a great deal, it might be well worth it.