When you go through the short sale process your lender will require certain documentation. Remember, the lender does not want to take the home back through foreclosure. That is a last resort for both the homeowner and the lender. The lender would rather accept a short sale as long as the borrower can show an inability to pay the mortgage.
Each lender has their list of required documentation. Therefore, the first step is to give your Realtor signed authorization to speak with the lender about your account.
Your Realtor will then request a "short sale package" from the lender. Most lenders require the following documentation.
- Exclusive right of Sale Listing Agreement
- A copy of the executed "AS-IS" Sale and Purchase contract
- Letter of Authorization to the bank to release Information.
- HUD-1, which is the estimated net sheet from a title company. The settlement statement will show all of the expenses related to the sale with the seller receiving zero.
- Hardship letter. A handwritten letter may be better to explain the borrower's situation and requesting a short sale. It should describe why the borrower cannot make their mortgage payments and their fear of possible foreclosure. It should be a plea for the lender to consider a short sale. Document to support Hardship (termination of employment, substantial medical bills, disability letter, etc.
- Personal Financial Statement form 1126, which includes current debt, payments and a household budget.
- Two years of tax returns and W-2's. Remember to provide signed copies of tax returns.
- Two most recent bank statements and retirement account statements. Be sure to copy both side of double-sided statements.
- Two most recent pay stubs
- A current Comparative Market Analysis (CMA) from a real estate broker or appraiser
- Buyers proof of Funds or Loan Approval letter
- Lastly note on the submission package that they need to order the BPO immediately and a negotiator needs to be assigned.
Make sure that when you submit the package it is COMPLETE. Some times it may be better to wait a day and ensure that it's complete than to submit an incomplete package. Remember the Loss Mitigator is deal with possibly hundreds of files at a time.
Lastly Note: With a short sale your Realtor should negotiate for the lender to waive their right to file a deficiency judgment. **IMPORTANT**
About the author:
Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of real estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.
Jerry LaRose, P.A., ABR, GRI, e-PRO, CLHMS, REALTOR® 407-580-7011
(Copyright © 2008 By Jerry LaRose, P.A. All Rights Reserved.)
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Jerry, I assume you wrote this post for the seller, but I do still appreciate you for putting this list together and I especially like the advice for the "Realtor to negotiate for the lender to waive their right to file a deficiency judgment". Have you been pretty successful with this? I'm about to embark on my first "short sale journey" with my sellers' lenders, so this list is very timely. Thanks!