FHA Short Sales

Posted on 26. Sep, 2011 by ssc in Short Sale Connection Blog

This post is directed to agents with short sales where your seller has an FHA mortgage. I'm addressing a problem I've seen over and over again. You present an offer to the lender, they order an appraisal (if the lender orders and appraisal rather than a BPO, it's a good indication of an FHA loan) Once the lender get's the appraisal back, they send you an Approval To Participate (ATP) Now, most agents seem to think this is like some sort or pre-marketing form approving the seller for a short sale and suggesting what they'd like to get. IT'S NO SUCH THING! This is a HUD generated form that clearly states the terms of an acceptable contract. READ IT VERY CAREFULLY! It specifies the amount the lender must net and the date you must close by (4 months). In other words, you have until that date to send them an offer netting them that amount or more or your seller's only options are foreclosure or deed in lieu. Either of these options mean your seller isn't getting a short sale done and you won't get paid.

Getting an ATP is great if it's for an amount you can sell the property for, but we usually see amounts higher. Again, If the ATP comes in too high, you and your seller are done.

So how do you avoid getting too high a figure on your ATP? There's no guarantee, but there are things you can do to help.

1. After you send in an offer, have showing calls go directly to you so you know who wants to show it.

2. When you talk to a showing agent, tell them you're expecting an appraisal and ask them if they're the one doing it or if they're showing the property to a buyer.

3. If it's the appraisal (get the appraisers cell number. with a 3rd party appraisal firm, the call may be from someone in the office) Tell them you have to meet all agents at the property. Of course these should be the instructions from you seller)

4. Meet that appraiser at the property and make sure they know why they're doing this value (often times they don't know it's for a short sale) Make sure they know any potential defects and marketing deterrents. It's very beneficial to have a home inspection report and estimates handy. Give them comps and a copy of the contract. Tell them about negative feedback and anything else that may negatively effect the price. Remember, if that appraisal, comes in too high, you're done! You're not trying to influence the appraiser to come in with an unrealistically low price...just a price that the property will definitely sell for, or lower just in case the current buyer walks. The lender doesn't want too high a price either. That doesn't help them. But they won't change their mind once they get that appraisal back. That will be their value, and that's what you'll be stuck with on the ATP.

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