HOMEOWNER SHORT SALE INSTRUCTIONS

Here is the documentation packet to provide to your realtor and/or lender when a short sale is unavoidable:

1. Original copy of mortgage paperwork.  This will allow you to address changes that have taken place since the home was purchased….changes in qualifying income, employment, assets, appraised value, etc.
2. Authorization letter:  Lenders will not disclose any personal information or negotiate with third parties without written authorization to do so.  The lender must be given permission to talk with those specific interested parties about your loan.  It should included the following information:  name, address, loan number, all known third party participants’ involved and contact information (email and fax are important to include) for everyone including the seller(s).
3. Payoff request:  Contact your lender for a current payoff including the amount of daily interest.
4. Proof of valuation:  the best approach is to get a full appraisal performed on the property although this does cost upfront money that a seller may not have (roughly $350).  Another option is a Broker Price Opinion (BPO) which should show value based on current values, the condition of the neighborhood, property condition plus any necessary repairs.  However, many lenders end up doing their own appraisals before they negotiate an offer.
5. Estimated net proceeds sheet with commissions, closing costs, payoff amounts, interest due, late fees, etc.  Most banks have a formula for what percentage under market value they will accept.  This amount varies considerably per lender…even more so between lenders in first position versus lenders in second position.
6. Hardship letter:  A complete description and timeline of the facts that created the current circumstances.  A valid reason must exist for the lender to consider accepting less than what is owed.  The circumstances must be unavoidable, such s loss of job, death, divorce, disability, serious injury, etc. Contact me for a hardship letter sample at lindalshank@msn.com
7. Pay stubs:  Covering 30 days including a year-to-date amount.  If this isn’t available, you should request a verification of employment for your employer breaking down their compensation, hours worked per week, bonuses and overtime and year-to-date earnings.  If the hardship exists due to job loss a documentation of termination is needed.
8. Past two years W-2’s.
9. Past two years 1040’s from Federal tax returns.  If self employed or investment property owned include all pertaining schedules.
10. 2 months bank statements, all pages, if not available, it may be downloaded online and printed or the bank can do a print out locally.
11. Other Assets:  Most recent quarterly statements for all retirement, stock, CD, money market etc. accounts.
12. Form a budget:  It would be prudent to draw up a budget based on your income, expenses, etc.  If you can show limited disposable income, it makes your package stronger.
13. Most recent escrow (impound) analysis:  This is to show the lender all liens and any past due taxes or if another loan exists.
14. Copy of a listing agreement:  The lender must approve the listing.  It is very likely that the lender will call for adjustments including the amount of commission paid.
15. Copy of fully executed contract:  Lender will generally only consider the package when there is an offer on the table.  Depending on the lender, once a sales price is agreed upon, back-up offers may be accepted.
16. Estimated closing date:  Closing time is one of the top issues for the lender…the sooner the better.  Often this is can be frustrating as the process in usually slow to get the lender to accept the short sale in the first place.  But, things have recently been improving in this arena.