This is the third part of my series on short sales. As way of disclosure, I am NOT an expert on short sales, I am using this series as a way for me to think through the process and hopefully become better prepared to help some Sellers who may qualify for a short sale.
A short sale can be a very complicated transaction. Not only are we negotiating with the Lender but there is another entity who may be involved as well....the Private Mortgage Insurance (PMI) Company. Most Buyers, that did not put at least 20% down when they purchased their property, were required to purchase PMI for the benefit of the Lender.
PMI protects the Lender for loses usually up to 20% of the loan amount. So, they have a say so in whether or not a short sale is accepted.
I am in the process of negotiating a short sale right now where I am actually negotiating with the PMI Company instead of the Lender. This is a first for me but so far it seems to be going well. The lady I am dealing with has been very helpful and she is the one that is handling the negotiations with the Lender. Have you ever done this before?
I'm very anxious to see how this plays out. Brian Brady wrote a very good post about this a few months ago titled "A Realtor's guide to PMI and Short Sales". Give it quick read.
Anyway, the point of this post is to make you aware of the fact that a short sale is a lot more complicated than just getting the Lender to agree to a price. The Lender is looking at the bottom line. If the short sale does not NET them more than a foreclosure then it ain't happening.
When meeting with potential Sellers you need to find out if they have PMI. If they do, then do the math. Brian is better at that than I am so if you haven't already....go read his post.
OK that's it for today. These are my thoughts. What are yours?
Other posts in the series:
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