short sales are full of requirements and conditions that can trip up both buyers and sellers. Getting the bank to accept less than what is owed on a property can be a challenge. Since the lender is positioned to take a loss on the sale, you will most likely have to deal with the loss mitigation department to process the documentation required to get the contract approved.

Other names for loss mitigation or departments that may handle it may include work-out, foreclosures, loan modification, or reinstatement. Some of the larger institutions may even specifically offer a short sale department.

If you are interested in short sale investments, here’s what to expect from loss mitigation:

  1. Send Authorization to Release Information Form or Power of Attorney. The Authorization to Release Information (ATRI) Form gives the lender the authorization to give you (the buyer/investor) information about the loan so that you can begin the documentation and negotiation process. If you are able to obtain a Power of Attorney from the buyer for this loan, then you will also have the ability to actually participate in the negotiations directly with the lender.
  2. Establish a rapport with the lender’s rep. Settling a short sale is not the most attractive prospect for a lender. Although preferable to foreclosure in many cases, lenders are not anxious to deal in short sales. If you are able to establish a good working relationship with the loss mitigation rep, then it will help move the process along.
  3. Once you build rapport the rep, send your short sale package. Make sure that you have done your homework and present complete documentation. Then follow up with the rep, after learning what the lender’s standard procedure is and how long the approval should take. You don’t want to be annoying, but you do want to maintain the relationship you have established and make sure that your deal does not get lost in the process.
  4. Once the deal is accepted, move quickly. Get the approval in writing, arrange any necessary financing and take all quested actions to get the deal closed. Many short sales fall out between the approval and close, so by moving swiftly through the last steps you hasten the ability to finalize the transaction.
  5. It is a good idea to stay on friendly terms with the rep. A small effort of sending a thank you note after close can go a long way.

short sales can be difficult for both borrowers and lenders. Establishing yourself as a well-educated, thoroughly prepared investor will help you move your next deal through the process.

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