Loss Severity

Pay attention to the loss severity of your short sale from the start. I would not necessarily panic if it is high but the contract price better be in line with Fair Market Value (FMV).

Loss severity is simply the percentage of return for the bank. All banks will have a loss severity number in thier guidelines that the initial loss mitigation group checks. For example if the balance of the loan is $300,000 and after all fees the bank would recover $240,000 then they would be getting $.80 on the dollar or a 20% loss. Not too bad but if the loss severity starts to move over 20% then you will most often have a concern. If, for example the bank recovered $150,000 or a 50% loss, then you should know that the typical hourly wage, loss mitigator will never be able to approve it.

Knowing this from the start would tell you not to waste too much time waiting for the loss mitigator initially assigned the file to respond to you. I would suggest escalating your file within 30 days of submitting it. As long as you are confident that your sale price was close to FMV you should have success taking this to the senior loss mitigator at the bank. Explain in a cover letter what the numbers are and refer to the loss severity and your personal BPO value. If they see that the numbers are justified they will push your file through.