11 Steps to a Successful Short Sale

1. Letter of Authorization - LOA

The Letter of Authorization is required by the lenders to confirm that they are authorized by all borrowers to release information to the negotiating party. Please contact your escrow officer for a copy of our LOA form, or visit us online at www.nat.com and search under "Services - Realtor®."

2. Hardship Letter

The Hardship Letter is the Homeowners' opportunity to state why they need relief from their mortgage. It is important that the letter is legible and preferably typed.

3. Financial Statement

The lender wants to review the borrowers‘ monthly income and expenses to determine the significance of the financial hardship. The information that should be provided is:

I.   Borrower(s) who are on the loan only

II.  Reasonable - if amounts allocated for groceries or entertainment seem out of line, the Lender might question that item and other parts of the file. Review the borrowers' financial statement before submitting it. Most lenders accept the Freddie Mac Financial Statement but there are exceptions.  If you have more than one lender who will be discounting their loan, you may need to have your seller complete more than one Financial Statement. (To find out which form to use and to get a copy, go to www.nat.com and click on "shortsales.")

4. Bank Statements

The lender will want to see two months of banking activity for all borrowers on the loan. Ask the seller to provide two months of statements for all non-retirement accounts, including bank accounts, brokerage and mutual funds.

The statements must be:

I. As current as possible

II.  Covering consecutive months

Note: Bank statements frequently need to be updated if the short sale process goes over 90 days.

5. Pay Stubs

The lender will require at least one month of pay stubs for each borrower on the loan. If a borrower has more than one job, pay stubs for all jobs should be included. North American Title requests that you provide two months of pay stubs from each borrower. This helps the lender get a complete view of the homeowners' financial situation. If the pay stubs are disability checks, these checks usually have no withholding - gross pay equals net pay. The lender will want a copy of the disability "awards letter" which outlines the terms of the disability income.

6.  Tax Returns

The lender will want to see two years of tax returns for each borrower on the loan. Please have your client provide Federal Returns only, for the two most recent years. If we are beyond April 15th, and the borrower has not yet filed for the last full year, include the taxpayers' signed and completed extension form. Always include all pages and applicable schedules for each tax return.

7. Purchase Contract

Please provide a "clean", fully executed copy of the purchase agreement which has been accepted by the homeowner. Include all counter offers and addendums.

8. Estimated HUD - Settlement Statement

The lender will work from the estimated HUD we provide, so review it carefully before including it in this package. Do not rely on your escrow officer to properly interpret your contract. If the estimated HUD is to include estimates for delinquent property taxes, repairs, expenses, and fees on a senior lien, allow some room in your estimate in case costs come in higher or it takes longer to close escrow.

9. Listing Agreement

A lender will want to see a fully executed copy of your listing agreement. Make sure the commission section has been completed. Regarding commission, keep in mind that the lender may want to negotiate.

10. Price History

The lender will want to know that every reasonable effort was made to maximize their recovery of capital. In many cases that means graphically demonstrating to the lender that the property was offered for sale at a price, or at prices, above the list price at the time an offer was received and accepted.

 The price history chart should include:

I. List date and dates prices were changed

II. Number of days at each price

III. Each price at which the property was offered

IV. The number of showings at each price

V.  The number of offers received at each price

VI. The amount offered in each offer

11.  Broker Price Option - BPO

The lender will want you to provide a simple and accurate BPO which states your estimate of the value for the property. If possible, use comps within ¼ mile radius and attach copies of MLS printouts.