Short Sale Process Flowchart

Short sales are going to be a part of the Portland real estate market for quite some time.  In its simplest form a short sale is where one or more lenders must approve a real estate sale because they are going to receive less money than they are owed.  A short sale can have major legal and financial consequences so it is imperative that an accountant and/or attorney be consulted as necessary.  The are also major ramifications to credit and FICO scores.

At the end of January we asked on our Facebook page what percentage of the active listings in Portland people thought were short sales.  Answers ranged from six percent to 81%.  At the time, it was 740 of 4316 listings- 17.1%.  Today it’s 780 of 4249 active listings- 18.3%.  NAR reported in March that 40% of sales nationally were distressed (short sales or bank owned).  Today, 26.5% of Portland’s active listings are distressed.

The process of selling a short sale is broken down into the most basic steps below.  This is the overall big picture of the process and there are some exceptions to what is outlined here.  We will be publishing buyer and seller centric versions soon.  The bank doesn’t start its review until there is an offer on the property.  They don’t deal in hypotheticals, “if we get an offer for X will you accept it?”  During the approval process the bank is simultaneously approving the seller’s situation (included documented hardship) and the price at which they will accept.  The process can take weeks or months and may never get completed before foreclosure becomes a reality.

Logic may take a back seat during the approval process.  What may seem like a total lack of urgency on the bank’s part cannot be interrupted that time frames or requested paperwork is not important.  Missing or inaccurate documents can derail or stall the process.  If the buyer backs out the process usually doesn’t stop which is why some listings may show, “approved at this price.”  The bank may honor the terms they approved the first buyer at if a substitute buyer can be found.

Short Sale Overview
Short Sale Flowchart Overview

We can’t reiterate enough that each and every short sale is unique and must be worked through under the guidelines of the specific banks and the individual situations of the parties involved.  The above is a generalization and simplified version of a complex process.

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