The Titles

Your short sale negotiator will deal with a myriad of individuals while negotiating your short sale.  To further complicate matters, different banks can apply different names to the different people reviewing the offer.  The file will be handled by several people inside and outside of the short sale department.  Let's get familiar with the individuals who will handle your file at the bank:

• Representatives - These are general bank employees with no direct connection to your file.  They are the people who answer the phone and can look into the notes of other individuals.  At times, reps can be useful in putting in requests for information, for having others contact your negotiator, or for putting in requests to escalate the file to a higher authority.  They are often the only source of information at the beginning of the review and are commonly the people most frequently dealt with, as there is almost always one available to answer a call.  However, they are also often those with the least information and can be near-robotic in their parroting of others' notes and their insistence that they know nothing additional.
• Account Managers or Relationship Specialists - These are the bank employees who are directly connected to the loan, but not necessarily to the file or the short sale review.  To elaborate, they oversee all of the activity on the loan and can often be instrumental in the assignment of individuals to the review in the short sale department.  It is important to remember that an account manager can be as of little use as a representative as they are largely limited to the information provided in the notes of others when it comes to the details of a review that is already underway.
• Processors - These are often the first individuals with a direct connection to your file.  Either a single processor or processing team will receive the file via fax, email, or regular mail and begin going through it.  A processor's job is mainly to establish whether or not the file is complete, meaning that it has everything that will be needed for the actual review of the offer to begin.  They are looking for all of the regular components of a file as well as any unique documents that the bank may require such as proprietary forms on bank letterhead.  In some cases, processors will review the documents beyond just their presence and look to see that the documents are acceptable (all pages included, all signatures present, all dates current) before passing the file along for the next part of the review.
• Negotiators - The name can be a bit confusing, naturally, as you'll have the negotiator you hire to negotiate the offer on your behalf with a negotiator negotiating on behalf of the bank.  Let that sink in for a minute.  Moving on, the negotiator can often be the most important and impactful individual assigned to your file.  The assignment of a negotiator is an important step as it signifies that there is a person in the short sale  department actually reviewing the offer to see if it's something management and ultimately the investor will approve.  It is the negotiator who can counter or accept the offer.  Some banks routinely have a succession of negotiators as the review progresses.  Some will sporadically assign new ones as negotiators are shuffled around, moved up, or moved out.
• Managers and Supervisors - At times the input and influence of a manager is necessary to get a file moving in the event that the review is stalled.  If your negotiator is dealing with a particularly unresponsive bank negotiator, they can request that the manager step in.  At times managers can move the file to another negotiator or even review the file themselves.

As every short sale is unique, the measure of influence of each individual can vary greatly.  Likewise, your short sale negotiator may have more or less communication with any given bank employee in any given review situation.  It is universally important that your negotiator know who is responsible for your file at the bank, whether or not they can interact with them directly.

Parallel Processing

During a short sale there is often a great deal of stress and confusion surrounding what the bank is actually doing at any given moment.  A short sale negotiator must continuously follow up with the short sale department of a bank in order to ensure that the file is moving through the stages smoothly.

But sellers, buyers, and agents must remember that there is more to a bank than the short sale department.  While the short sale is active, there can still be other processes that are going on concurrently and independent of the short sale review.  Many times I've been called or emailed by a frantic seller regarding a call or a notice they received from the bank which somehow led them to believe that their short sale was not being reviewed.

Notices and communications should be brought to the attention of your negotiator, but most of the time actually do not mean anything in direct relation to the short sale review.  At any given moment; the short sale review, foreclosure process, and collections efforts can all be happening at the same time.  While there is some minor relation, these are mainly just parallel processes.  To elaborate:

• Collections Efforts - During a short sale review, the bank may still make attempts to solicit payments from the borrower.  The borrower can firmly reply that they are in active short sale review, but often times this is of no importance to the bank.  It is the collection department contacting them, independent of the short sale, and all they are interested in is getting a payment.

• Foreclosure - The bank will often continue to exercise its right to proceed with foreclosure throughout the short sale review process.  Again, it's not that the bank as an entity doesn't know about the short sale, but rather that the foreclosure department is on its own schedule.  The borrower may receive foreclosure documents as the review goes on and should always forward these to their short sale negotiator.  Most often when push comes to shove, the bank will postpone any actual foreclosure sale dates as long as there is a valid offer being reviewed for short sale.  However, it may become necessary for your negotiator to contact the respective departments to remind them of where things stand from time to time.

When a borrower is in default, the bank sees this as a major risk and does what it can to get its money.  They are very persistent to this end and will more often than not continue 'round-the-clock to pursue means to get money.  From the routine (collections) to the extreme (foreclosure) the bank will be after money in one or more ways through processes that are independent but parallel to the short sale review.

Choosing Your Short Sale Negotiator

If you are facing foreclosure and interested in pursuing a short sale, you need to know what to look for in a short sale negotiator.  Since the recession became an undeniable reality, many businesses have popped up that offer short sales, loan modifications, deeds in lieu of foreclosure, and settlements.  These efforts fall under the broad category of foreclosure mediation.

In looking for a business that offers these services, and eventually an individual negotiator, there are several qualities to seek:

• Proximity and Physical Establishment - An ideal negotiation team is not only licensed in your jurisdiction but also located in or around it.  The business you're looking for should have an actual location that you can visit so you can meet with your negotiator for a consultation and for periodic follow-ups or to hand-deliver documentation. 
• Be wary of businesses which only seem to exist on the internet.  Also be wary of solicitors who contact you directly over the phone as they may not represent a reputable business and may even work on behalf of the bank that services your loan.
• Eperience in the Field - Look for a firm with a good deal of collective experience.  You shouldn't look for a business without any reviews or testimonials because this may strongly indicate either a lack of effectiveness or a lack of experience.  In meeting with a short sale negotiator for a consultation, you have every right to ask how long they have worked in the field and roughly how many short sales they have closed.
• Presence of Attorney(s) - Having an attorney as a negotiator or at least having one or more employed at the business is an extremely valuable tool.  Depending on your jurisdiction, an attorney may have more authority and more tools available to mediate the foreclosure process.  In some states and some cases an attorney can halt an active foreclosure in the court if they can prove that the bank has not given ample consideration to an offer.  This legal maneuver is called a motion to stay in Maryland and an injunction in the District of Columbia.
• This is a more complex aspect as the actual requirements vary between different jurisdictions.  There are states where the negotiator must either be an attorney or working under one in order to legally negotiate a short sale on your behalf.
• Presence of Realtor(s) - Realtors also have a wealth of knowledge in the real estate field.  It is also beneficial to just have a Realtor or Realtors in the office as they may be more familiar with the area, home values, and comparable properties.
• Pricing and Fee Schedules - Any business worth its salt will charge for a short sale as it is a difficult process for one to negotiate.  That being said, pricing and fee schedules should be considered strongly.  Be sure to ask exactly what you are paying for and when your payments are due.  The majority of firms will charge a portion of their total fee up front and the remainder upon the completion of a short sale.
• Rapport - Finally, you should select a negotiator who you actually get along with.  In your consultation you should consider if the person you are meeting is someone with whom you should work.  Make sure to ask any questions you have about the services they offer and gauge their answers carefully.  If by the end of the consult you do not have a feeling of relation or trust, you should consider meeting with another negotiator, possibly at a different establishment.

A short sale is a service and you have every right to be selective in who you will hire to perform it.  It can be difficult to settle on one provider given the myriad of businesses that exist, especially since the recession.  To paraphrase a mentor of mine, people aren't looking for a website with pictures of money bags, promises of the world, but no indication of skill and experience.

I have worked for the Law Offices of Jill Pogach Michaels located in Maryland, which also does business in Washington DC and Virginia, where I've gained my three years of experience in the field.  I can personally say that they are an establishment which possesses all of the qualities I have outlined above.  Look for the stand-out business in your community and find an individual there who you believe can help you best.  Also, check your local laws in order to see the legal requirements for a business to offer the service.

The PHUR Arguments

In negotiating short sales, there are many points that a negotiator must argue to the bank.  In my experience, these fall under four main categories, which you can remember as PHUR:

• Price - A negotiator must argue the purchase price of the offer being submitted.  The bank is looking for a net at or above that which they would obtain from a foreclosure auction.  Since the bank has the authority to foreclose and collect on this money, they want to see that they can be offered as much by the negotiating team.
• Hardship - Detailed more in the article "On Hardship," the negotiator must argue that the homeowner is facing circumstances which negatively affect their ability to pay.  While a house need only be worth less than what is owed on the mortgage for a short sale to be necessary, a bank will not accept that reasoning alone.  They are looking for a compelling hardship which can be proven through documentation.
• Urgency - Often times it is necessary to communicate to the bank that the request for a short sale is urgent and needs to be dealt with quickly.  Since the foreclosure and short sale processes happen largely independently (a phenomenon which I will expand upon in an upcoming article) your negotiator may have to emphasize to the bank that they are running out of time to review the short sale.  Urgency can also be tied in with the hardship, as some hardships may be exacerbated by the prolonged review process.
• Responsibility - Arguing that even from the bank's perspective, a short sale is the more responsible option.  As a short sale essentially achieves the same ends as a foreclosure sale, the bank needs to be convinced that the short sale is the more responsible option.  Some key facts that the bank needs to consider:
• In a short sale they are getting market value without having to incur the cost of hiring a foreclosure firm (if they haven't already.)  They do not have to pay the fees associated with actually conducting the auction.  This means that a short sale nets them more money in the long run, while doing the listing and selling work that the bank would otherwise have to hire someone to do.
• The bank does not have to assume ownership of the post-foreclosure property as real estate owned (REO.)  They are not interested in owning the house, as it makes it makes them responsible for selling it.  To put it simply:  If they foreclose, all they get is a house.  They then have to deal with selling it.
• The bank has a fiduciary duty to the investor who actually owns the loan.  Combining the first two points, it needs to be argued that the bank must entertain the option which nets the most money for the investor.  The bank needs to be reminded that a short sale often fetches much more money than any foreclosure option could hope to.

The handy acronym (sounds like "fur") can help you remember the key aspects of what your negotiator will argue on your behalf.  With a full coat of PHUR, so to speak, your negotiator greatly increases the chances of pushing a short sale though.

On Hardship

A seller must have a hardship in order to be considered for a short sale.  This, despite what anyone tells you, is absolutely necessary.  However baffling it may be, banks are often looking for excuses to reject short sale offers in order to proceed with foreclosure if they cannot get the full balance of the loan from the borrower.  If they cannot see that the borrower has experienced a hardship, they will see no reason why they cannot become and stay current on their mortgage payments.  As such, demonstrating hardship becomes more difficult if the borrower hasn't missed any payments.

There are different aspects of hardship which the bank will be looking for beyond the mathematical demonstration that the borrowers cannot afford their payments.  I'll roughly order them by how impactful and effective they are in the bank's eyes and the probability that they will accept the hardship as legitimate:

• Loss (or "Curtailment") of Income - This is a common occurrence in these recession times, it is also the most compelling type of hardship as it is beyond the control of the borrower.  Loss of income can result from the loss of a job, a loss of available hours, a pay cut, or less opportunities to earn bonuses or commissions which a borrower relies on.  Self-employed borrowers can cite a loss of business as a loss of income.  
• Divorce or Separation - Often times when a couple that owned a property together divorces or separates, the issue of what to do with the house comes up.  If neither can afford the mortgage payment on their own (an situation which needs to be documented and provable) then they may decide to sell the property short in order to go their separate ways.
• Unavoidable Circumstances - There are several of these which may be accepted.  In arguing that it makes for a valid hardship, it has to be argued as necessary and unavoidable.  A prime example would be a required relocation for a job.  In this scenario, the borrower has no choice but to actually leave the property, and they may be left with no choice but to sell it short.
• Damages - It is possible that due to any uncontrollable incident, such as a natural disaster, that the property may be rendered uninhabitable.  Repairs can be demonstrated to be outside of the financial reach of the borrower, making it necessary that they move somewhere more affordable.
• Sudden Necessary Expenses - Expenses which were unplanned and involuntary.  Often-cited circumstances include a death in the family or a sudden illness which would incur funeral expenses or medical expenses respectively.
• Increased or Unmanageable Expenses - This can be the hardest circumstance to argue.  This alone is often insufficient for arguing an actual hardship as the events contributing may be seen as voluntary and not directly related to the ability to pay the mortgage.  A bank will not look so favorably on recent large purchases, failed investments, or high credit card bills as they see these as within the borrower's control.

It is important to note that a hardship cannot simply be that the house is underwater - worth less in the current market than what is owed.

As an essential part of the short sale file submitted to the lender(s,) there needs to be a hardship letter which outlines the contributing factors of hardship in an effective manner.  The best hardship letters have specific dates of when circumstances arose and actual figures which outline changes in ability to pay.  Also, always remember to sign and date your letter to the bank.

On Counters

Everyone involved in short sales must recognize that the offer submitted to the bank is more than just the gross dollar amount.  As can be seen on the standard HUD-1 settlement sheet, there are a myriad of services, fees, and other dollar amounts that are itemized.

Most people only know of the bank countering on price (the purchase price of the property,) but counters can come in many forms at many times.  A bank is most interested in one line of the HUD-1:  Their payoff (or "offer net.")  If they assess through their analysis of the offer that there is money going elsewhere while it could be going to their payoff, they may choose to counter.  They could challenge any number of items and it's up to your short sale negotiator to ensure that the deal remains viable.

Counters can also be countered by your short sale negotiator, a turn of events which could end then and there, or lead to further counters until the bank has an acceptable offer.

Let's look at an example in the negotiations of "Mr. Smith," typical homeowner and short sale applicant:

• Mr. Smith has a mortgage with a balance of $300,000.  His house in the current market will only sell for considerably less.
• Mr. Smith gets an offer for $250,000.  Since he will be short, he seeks out a professional to negotiate the short sale.
• The offer is submitted to the bank with their payoff worked out to be $220,000.  So, to the bank, Mr. Smith is selling his home $80,000 short (the balance less the offer net.)

• Counter Scenario One -  The bank performs a BPO on the property and asesses it to actually be worth $275,000.  They counter at the full BPO price.
• Suddenly the bank firmly believes that the house is worth substantially more than is being offered. 
• The bank presumes that they could get more money in a foreclosure auction than is coming to them from the offer.
• With all other fees remaining the same on the HUD1, they see that if the purchase price were raised, the difference would be added into their payoff.
• Mr. Smith's short sale negotiator can ask the buyer side to raise the purchase price to the full BPO value or they could counter it.  The counter could be somewhere in between the two figures or could even be at the same price originally offered, often necessitating that the negotiator challenge the BPO value as incorrect.

• Counter Scenario Two - The bank counters the settlement fee of $1,500 at $1,000.
• Yes, even for only $500 a bank could counter, knowing that the difference will be added to their offer net.
• Often the bank will counter to reduce or remove fees that they believe to be either too high or extraneous respectively.
• Mr. Smith's short sale negotiator again has the option of complying with the counter or countering back.  An experienced negotiator argues for what they know to be necessary, or believe to be appropriate, for the specific transaction.

Naturally, the two categories above only scrape the surface of the process of short sale negotiation.  A good negotiator will know when to accept, meet in the middle, or stand their ground in the event of a counter.  It is also worth noting that higher tiers of review can counter on an offer accepted by a lower tier, as would be the case if Mr. Smith's investor decided that the purchase price should be even higher than what the bank accepted.

On Acceptance and Approval

The most important thing that I find myself repeating to sellers, buyers, and agents is that the acceptance of an offer is not the approval of an offer.  Granted, different banks can use the terms interchangeably, but the following applies to the majority of scenarios.

Acceptance of an offer means that the bank accepts the terms of the offer as it is.  The opposite event is a counter, which is when the bank challenges one or more aspects of the offer (sales price, payoffs, fees, etc.)   Counters can happen at several points during a short sale and there can easily be more than one counter.  Likewise, your short sale negotiator can counter a counter with one of their own.  In the event that the bank won't counter (or is done countering) the offer can be said to be accepted.

Approval is a very different, and very specific, event.  While some banks sometimes refer to acceptance as "bank approval," there is officially no approval until your short sale negotiator has an approval letter in hand that matches the terms of the contract and the specifics of the HUD1.  Most commonly, an accepted or "bank approved" offer will be forwarded to the investor who actually holds the loan.  The investor then can accept or counter.  When they accept, they authorize the bank to issue a short sale approval letter.

Some confusion and false hopes can arise upon getting a verbal approval.  This is when the bank communicates to your negotiator that the file is in fact completely approved but nobody has seen the letter.  While everything may seem like a done deal, some banks can take days or even weeks between "approving" and issuing the letter.

So remember, a file is not approved until there is an approval letter in hand.