Broker Bryant and I just finished teaching Short Sale Basics: Session 2, part of our 5-session webinar series about short sales. Today we covered qualifying the seller and short sale documents. There was a lot of material, in fact we went over time! Part of our in-depth analysis included dissecting the financial worksheet (one of my favorite things to do). We provided a made-up example and found “errors” for discussion.
Here are a few of the possible mistakes you might find in the financial worksheet:
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Numbers don’t add up – that’s right, simple math mistakes adding up income and expenses.
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Monthly gross income used, not net income
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Annual gross income used, not monthly
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Bonuses from last year are included in current year
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Current year commission or P&L is based on last tax year, not recent income
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Rental income listed when tenant is moving out
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Gross rental income is not adjusted for expenses
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Listing the same military base housing allowance when it is changing upon relocation
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Incorrectly assuming property value when listing assets
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Not including current mortgage and associated expenses for short sale property
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Not including anticipated rent and expenses upon relocation
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Spending money on frivolous items, like tennis lessons, skydiving, vacations, etc.
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Not itemizing “miscellaneous" expenses
Finally, when monthly net income is more than monthly expenses- there may not be a hardship at all!
The financial worksheet is one of the most problem-ridden parts of a short sale package. In a questionable hardship case, you can use the financial worksheet as part of your seller pre-qualification.
Want to learn more? Our next Short Sale Basics webinar is Saturday, July 18, at 11:00 Eastern. All five sessions will be available on MP3 if you cannot attend live or miss any. Session 3 we will be covering the short sale listing, price reductions (one of Bryant's favorite subjects) and more. See you then!
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Wendy,
Thank you for posting. Financial statments are just as important as net sheets. Having a past life as a settlement/escrow agent I absolutely know that the agents who "really" understand these reports, provide a more complete service to their sellers.