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Once the contract has been approved by the lender, depending on the requirements of your particular Short Sale Addendum and/or your contract requirements, the Option or Contingency Period should begin and the Buyer should immediately schedule any inspections and proceed with any financing arrangements. It is important that you remind the Buyer and/or Buyer’s Agent that the house is being sold as-is and that neither the Seller nor the lender can make any contribution toward repairs. The Buyer’s inspections should only be to determine if there is anything so terribly wrong with the property that they would want to terminate the contract.

Also, we recommend that you get the name and contact information of the Buyer’s Mortgage Broker/Lender and confirm with them their understanding of when Buyer’s closing costs are and are not allowed and the maximum allowable amounts depending on the type of loan the Seller has and the type of loan the Buyer is securing. Remember, other than the Loss Mitigation Rep approving the Short Sale, the two other most important players in keeping this deal together are your Escrow Agent and the Buyer’s Mortgage Broker/Lender. They all must be in-sync with each other or your deal could fall apart.

We recommend that you stay in close contact with the Escrow Agent ensuring that he/she understands the Short Sale lender’s rules and guidelines for closing a Short Sale, and that he/she has all the documentation he/she needs to get the transaction closed. We also recommend that you have the Escrow Agent fax/email you a copy of the HUD-1 Settlement Statement at least 72 hours prior to closing. Your Loss Mitigation Rep will usually require that he/she have 48-72 hours prior to closing to review and approve the HUD-1. Make sure the Escrow Agent is aware of this, otherwise your closing might get delayed.

Also, be sure that the HUD-1 nets to zero for the Seller (line 603 of the HUD-1). If it doesn’t, the Loss Mitigation Rep will likely disapprove it and the HUD-1 will have to be reworked until the numbers meet their guidelines (see “Note” below). As you are well aware, figures can get shuffled around on the HUD-1 all the way up until closing. We have found that on occasion, we have arrived to closing and there was an amount due from the Seller, due to various incidentals that invariably pop up at the last minute, such as an increase in HOA or tax delinquencies, etc. It is important to have an Escrow Agent that understands the Short Sale closing procedures in order to avoid the possibility of your commission being reduced because of unnecessary discrepancies or surprises. Again, if you have a good Escrow Agent who is experienced at closing Short Sales and you stay on top of all the communication between all the parties, you should have no trouble getting the transaction closed without a hitch!

**Note: As a general rule, in a Short Sale the HUD-1 should net to zero for the Seller (line 603 of the HUD-1). There is one exception to this rule. If you are doing a HAFA Short Sale, the Seller receives a $3000 Seller Incentive which should be reflected on line 603 as Cash to Seller.

Next week we’ll begin to address some of the Frequently Asked Questions we’ve received through our many years of working with and training agents to successfully facilitate short sales so we can save one more homeowner from foreclosure.