Building Homeownership by Brien McMahon
RISMEDIA, February 11, 2011—My December article, “Shortening the Short Sale,” generated quite a few questions from readers who were looking for answers to more specific questions related to short sales. In response, I thought it would be helpful to provide some additional details that shed more light on the unique role of short sales in the real estate industry.
While most of the questions are regarding the same key themes, there are still too many for me to answer in one article. Following are some of the most common questions and the corresponding answers, which I think will be helpful for real estate agents as you are negotiating these types of sales more frequently in today’s housing market.
Short Sale FAQs
-What information does Radian require to consider a short sale?
Since short sales are time sensitive, Radian accepts minimal information to consider a request. The next payment due date, outstanding mortgage balance, property value, purchase amount, estimated net proceeds and settlement date are the basics needed along with a borrower financial statement. Additional information may be required to make a final decision.
-How long does it take Radian to respond to a short sale request?
Radian responds within two business days, but if additional information is needed to evaluate a request, a response can’t be provided until the requested information is delivered.
-Will Radian discuss its approval terms directly with the REALTOR® or seller?
Yes, Radian Workout Specialists will speak with the agent or seller to clarify approval terms and negotiate a mutually acceptable arrangement. The specialist’s name and phone number can be obtained from the mortgage servicer and it’s also important to obtain the Radian Certificate Number so the specialist can quickly identify the case.
-What terms and conditions are included in Radian’s approval?
Radian’s approval terms and conditions generally consist of the purchase amount, required net proceeds, a projected settlement date and, if applicable, the seller financial participation requirement and specified funds to the junior lien holder.
-Are Radian approval terms negotiable?
Yes, and Radian makes every effort to offer favorable approval terms acceptable to the seller.
-Does Radian’s approval of a short sale include a release from mortgage liability?
Yes, but only to the extent of Radian’s loss. A release of mortgage liability should be obtained, in writing, from the mortgage servicer.
-Why does Radian sometimes require the seller to contribute financially to a workout?
A short sale is an alternative to foreclosure—a settlement of a financial obligation and workout that requires compromise by all parties. If in a position to do so, the seller should participate financially by paying a reasonable portion of what they owe in exchange for approval of a transaction that has value. However, more often than not, Radian does not require seller financial participation.
-How does Radian determine the amount of required seller financial participation?
Seller financial participation requirements are negotiated on a case-by-case basis after a careful review of available information regarding the seller’s financial and default situation.
-How does Radian determine the promissory note and/or cash payment terms?
Radian is flexible with payment terms in an effort to work out a settlement with the seller that allows the sale to move forward. The promissory note is unsecured and interest-free.
While there can be many obstacles that arise in the pursuit of short sales, the keys to overcoming them are education and knowledge. I hope these FAQs will help you master the basics of short sales and enable you to make them a win-win for yourself and your clients.
Brien McMahon is chief franchise officer of Radian Guaranty Inc. More information may be found at www.radian.biz.
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