What is Needed to Submit a Short Sale Package to a Lender?
Each lender requires relatively the same documents. You should be prepared to provide supporting documentation for any financial information provided to the lender.
The Short Sale Packet:
Listing Agreement - Lenders want to see that the home is actively being marketed for sale. In addition, the lender wants to verify that actions are being taken to maximize the price for the property in order to minimize their loss. The lenders can be very wary of non arms-length transactions. These are transactions that involve related parties and are normally rejected by the lender. A listed property that has been exposed to the entire market place (and not to just a few investors) is more likely to be taken seriously by the lender.
Authorization to Release Information - This form will give whomever the borrower appoints, permission to speak to the lender on their behalf. Without authorization, the lender will require that all communication go through the borrower.
Short Sale Hardship Letter - Lenders require a hardship letter from their borrowers. The purpose of the letter is to tell the bank "what happened" and what led the borrower to becoming delinquent on the mortgage. Be honest, brief and persuasive. Don't blame a negative equity situation as a reason for your delinquency. Don't blame your loan officer for giving you a loan that you didn't understand or was not in your best interest. It goes back to the old saying "Buyer Beware". Every borrower should read their mortgage contract and if they do not or did not understand it should have sought the advice of an attorney. Avoid using obscenities.
Financial Work Sheet - Some lenders require this while most don't. However, in my opinion, this is one of the most valuable pieces of evidence for hardship that you can provide to a lender. While the hardship letter can be useful, most don't illustrate the entire story. The financial work sheet will reveal a borrowers hardship much more accurately than a letter.
Two Most Recent Pay Stubs - The lender wants to verify any information that you provided on your financial work sheet.
Two Most Recent Bank Statements - Again, this is to corroborate your current financial standing. In addition, when going through the short sale process it is important to keep in mind that little recording you hear every time that you call the bank (or the bank calls you), "This is an attempt to collect a debt...." They are also checking to see if you can make this month's payment!
Last Two Years W2s: Once again, they are looking for verification of the hardship and to make sure that your income matches what you put on your financial worksheet.
Last Two Years Tax Returns
Preliminary Settlement Statement: The lender will use this to calculate their loss. It is important for this to be as accurate as possible as it may be the difference between accepting your offer or not.
Sales Contract: Once again, this is used for the calculation of loss to the lender. Once they receive an offer to purchase they will have a Broker Price Opinion (BPO) or appraisal done completed. They will make a decision to accept the offer or not based on what the house is worth, what other bank owned properties are selling for in the area, amount of loss they might incur and the cost to hold the house as a REO property (taxes, insurance, maintenance etc). The time it takes for them to make a decision could be a couple of weeks to a couple of months.
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