I have covered in previous blog articles numerous aspects of a short sale.  I have discussed it from the standing of the homeowner (seller), from the investor and even the ultimate homeowner (buyer).  I have discussed in great detail what an agent needs to know in order to successfully process a short sale.

Today, I want to re-examine what I need from the seller to move forward in successfully marketing, negotiating and selling a Hemet property in a short sale situation.

There is of course all of the standard listing agreement and disclosures that are mandatory for every California REALTOR® to complete on every listing - so I won't get into the details of the norm, here.

However, there are a couple of disclosures that the seller does have to complete in their own handwriting.  I will typically leave these behind, asking the seller to take some time and consider their answers very carefully.  If they are anything but honest, they could still be held liable.

I try not to make too big of a deal over them. I just don't want to be there as they answer the questions and try to pull me into their schemes to cover up or manipulate the truth to shine best in their favor.  The less I know, the better off I am.  I am responsible for my own inspections and for their paperwork - not to cover-up anything.

Once I have gone over the disclosures, I request financial documents.  I want two years worth of federal tax returns or letters explaining why they do not have them.

I need 2 months of pay stubs for all occupants for the home - including teenagers if they work.  If there is any other income, I need to know about it and have documentation supporting the source and amount.

Bank statements are the nest integral document that I require to build my file substantiating their inability to pay their mortgage.  Two months of statements from every financial institution they belong to - including checking, savings, investment, retirement and the contents of any safe deposit boxes.  I always ask if they have any money or assets out of state.  You'd be surprised at what people have and don't want to disclose.

I will require a copy of the most recent mortgage statement - for all loans.  This will have all o f the banks contact information and loan data I need to precede.

Notice of Default (NOD) - It amazes me how few homeowners hang on to this very important document.  I need it and I want them to provide me with a copy.  It is critical that I know exactly when it was recorded.  If they cannot produce one, I will ask them to go to the County Recorders office and pull one for me.

The Hardship Letter

Perhaps the most difficult item on my checklist is the hardship letter.  It forces the homeowner to sit down and put in their own words a summary of their life in it's current state - which usually is anything but pleasant.

The hardship letter is like having a professional photographer catch you as you wake up in the morning stumbling your way into the bathroom to freshen up - and having that picture on the cover of Life Magazine.  No one wants to do it.

The hardship is critical.  The financial documents required above paint a picture using broad strokes of the condition of the homeowner.  The hardship letter focuses on the details as to what happened in the life of the Hemet CA borrower.  The hardship letter puts a face on a statistic.

For this reason, the hardship letter the Hemet homeowner writes for their short sale package MUST be handwritten and no more than 2 pages long.  There are several very important issues that must be addressed/

First and foremost, a brief introductory letter explaining how life was, prior to the hardship.  This is immediately followed by an explanation of what happened.  Everyone who has endured a hardship knows exactly what event triggered the hardship - so go back to that date.  It is not the date the family runs out of reserves, but rather the date that triggered the event that ultimately caused the family to tap into their reserves in the first place.  It may be the date of an accident, the date someone is diagnosed with a incapacitating disease or even the day you heard that there were going to be massive layoffs at your place of business.

Explain what steps were taken to minimize the impact of the hardship.  Examples may be that the kids were pulled from their Karate and Dance lessons, no more eating out, and plans to attend the family reunion back east were cancelled.  Let the reader know that you have done your part to minimize the impact of your hardship and that you have done everything to save your Hemet home from being foreclosed on.

Explain that you are now at the end of your rope that you see no other options other than to possibly file bankruptcy but you are willing to do everything possible to avoid that last blow to your dignity.

In a very humble tone, ask them to please work with your negotiator (REALTOR®) to allow this offer to be processed and approved.

Final word of Caution

Now that my Hemet home sellers realize what is involved in a short sale, I must caution them about one more very significant point - FRAUD.

I look them right in the eye and tell them that I am not here to be judgmental, but I need to know if they lied at all on the loan application that qualified them for the loan.  99% of the time, I will hear a NO delivered verbally with a slight look of panic on their face as they will ask why.

I explain that many people fudged numbers or length of time of employment when qualifying for the loan.  It was common practice to manipulate the loan approval process, letting the bank see the picture they wanted to see, in order to qualify for the loan and buy the house they will eventually lose. 

I let them know that any small little white lie is considered mortgage fraud and if they contradict themselves with the documents they need to provide to process a short sale, it is very possible that at some point the District Attorney may file criminal fraud charges.

I leave the homeowners with my list of requested documents and ask them when they will be able to bring them to my office.  I am looking for an answer within the week.  If it will take longer, I need to know why.

When the documents don't show up and I follow-up with a phone call it is typically because they have decided to not pursue the short sale.  This is the advantage of allowing them time to think and talk among them selves...and really remember what they put on the original loan application.

Until Next Time, Have a Blessed Day,

John Occhi, Hemet CA REALTOR®
Mission Grove Realty

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner please call (951-443-6259) for your free copy.

 This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. 

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I am proud to be a full time REALTOR® with Mission Grove Realty who is proud to be a contributing member of the ActiveRain community.