When under financial distress, monthly mortgage payments can become too much of a burden. Instead of missing payments and having the property taken away by the lender, some will choose to do a short sale instead. Short sales are when a property is sold for less than the remaining mortgage, and are usually done to avoid a foreclosure and take less credit damage.
It’s a stressful and time-consuming period for the seller; that’s why real estate and escrow agents are there to help out in the process. Sellers can also guarantee a successful short sale escrow in their own ways, even before a buyer is selected and the deal is closed. This article discusses ways to ensure a successful short sale escrow process.
1. Be honest in convincing the lender
Lenders don’t want short sales. Before anything, you need to convince them that it is your only option left financially. That may mean talking about losing your job or going through a divorce, which can sometimes be uncomfortable. But above all else, it’s important to be honest in your reasoning. They don’t want to hear about debts or other expenses that you didn’t disclose when you were first getting the loan.
2. Find experienced agents
Once the lender approves your short sale, it’s time to find the right people to help you sell the property. Short sales are a different kind of sale that not all real estate agents have experience in. It’s important to find an agent who has handled short sales in the past, so they can properly market your home and inform you of important details throughout the process.
Even though escrow agents will come in once the transaction is being made, you can look into reliable agents early on so that the process can happen quickly when finalized.
3. Include everything in the listing
You don’t want the buyer to suddenly pull out of the short sale escrow process midway because of something they didn’t know before making an offer. When listing the property, ensure that you disclose all the details. For example, the buyer should know that all offers and sales need to be approved by the lender, even if the seller initially agrees to it.
The details in the listing also need to be agreeable and marketable so that buyers will be interested right away. Consult with your agent on the right price—not too low that the lender won’t approve, but not too high for a short sale.
4. Choose the right buyer
The most crucial step to a short sale is choosing a buyer with the most agreeable offer. Always remember: everything needs lender approval. Before agreeing to anything, negotiate an offer that is somewhat close to the market price, so that the lender is more likely to approve. It’s also worth looking into the buyer’s finances to make the escrow process easier during the sale. Do they already have a mortgage preapproval? Can they put down the needed payment? Overlooking these things can complicate the process later.
Once you’ve chosen a buyer, sorted out a deal, and the lender approves, you’ll need a trusted escrow agent to handle the transaction. Just like your real estate agent, choose someone reliable, credible, and experienced.
5. Close the sale ASAP
When all parties have agreed to push through with the sale, the lender wants it to close quickly, usually within 30 days. While the deal is being closed, make sure to cooperate with your escrow agent on deadlines and signings to avoid delaying the sale. Communicate with the buyer and the escrow agent throughout the process so that you can anticipate and quickly solve any problems you encounter along the way.
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Key Takeaways
- Short sales are done during financial distress, and it can be a very worrying process.
- To ensure that the short sale is approved and the escrow runs smoothly, be transparent with the lender throughout the process and adhere to all requirements and deadlines.
- Preparing for the short sale through choosing the right buyer, coordinating with real estate and escrow agents, and adhering to deadlines ensures a smooth escrow process.
References
- Chen, J. (2025, January 26). What Is a Short Sale on a House? Process, Alternatives, and Mistakes to Avoid. Investopedia. https://www.investopedia.com/terms/r/real-estate-short-sale.asp
- The 12 Steps of a Successful Short Sale Process. (2019, June 17). Mashvisor. https://www.mashvisor.com/blog/steps-successful-short-sale-process/
- The Short Sale Workflow. (n.d.) National Association of Realtors. https://www.nar.realtor/legal/risk-management/the-short-sale-workflow
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