Required Documents
When you go through the short sale process, your lender will require certain documentation.
Each lender has their list of required documentation. Therefore, the first step is to give your Realtor Signed Letter of 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.
· Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
o Property Address
o Loan Reference Number
o Your Name
o The Date
o Your Agent's Name & Contact Information
One of the first items an agent will need is to get a Letter of Authorization signed by the owner. This authorization when faxed into the lender will allow your agent the authority to speak with the lender regarding your loan. This does not give the agent the authority to make any changes to your loan.
What I do: First fax in an authorization along with a letter requesting information on owner assist programs, status of the loans, payoff information and short sale requirement package to be faxed back to me. I first give the lender time to circulate it to the correct department and contact person, then I call to verify that they received the fax and if they have authorized me to speak to them as a follow up.
Once I received the information I requested, I will notify the owner.
· Preliminary Estimated Net Sheet (HUD-1 Settlement Statement) The settlement statement will show all of the expenses related to the sale with you, the seller, receiving zero. This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale. Obtain from a title company or Closing Attorney's office, depending on what state your property is in. In Georgia, Closing Attorneys would be able to prepare the Preliminary HUD-1.
(Please note that if you have been approved for a HAFA Short Sale, you may be entitled to $3,000 at closing, and if you were approved for the Cooperative Short Sale program, you may be entitled to receive $2,500 at closing). Please contact us for more information about these programs.
· Hardship Letter
The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
· Documentation supporting the hardship (termination of employment letter, disability letter, doctor bills, etc.)
· 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.
· Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
· Two most recent bank statements and retirement account statements. Be sure to copy both sides of double-sided statements. · Two years of tax returns and W-2's. Remember to provide signed copies of tax returns.
· Two most recent pay stubs
· Current debt, payments and a household budget
· Signed IRS Form 4506 "Request for Copy of Tax Form". This is so that the lender can verify that the submitted returns actually match the originals sent to the IRS.
· Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
· Current Comparative Market Analysis (CMA)Your lender will order and coordinate this with your Real Estate Broker or Appraiser. Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a Comparative Market Analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
o Active on the market
o Pending sales
o Solds from the past six months.
· Executed Purchase & Sale Agreement & Listing Agreement
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections. (Also attach buyer's proof of funds or loan commitment (Pre-Approval Letter)).
Each lender has their list of required documentation. Therefore, the first step is to give your Realtor Signed Letter of 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.
· Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
o Property Address
o Loan Reference Number
o Your Name
o The Date
o Your Agent's Name & Contact Information
One of the first items an agent will need is to get a Letter of Authorization signed by the owner. This authorization when faxed into the lender will allow your agent the authority to speak with the lender regarding your loan. This does not give the agent the authority to make any changes to your loan.
What I do: First fax in an authorization along with a letter requesting information on owner assist programs, status of the loans, payoff information and short sale requirement package to be faxed back to me. I first give the lender time to circulate it to the correct department and contact person, then I call to verify that they received the fax and if they have authorized me to speak to them as a follow up.
Once I received the information I requested, I will notify the owner.
· Preliminary Estimated Net Sheet (HUD-1 Settlement Statement) The settlement statement will show all of the expenses related to the sale with you, the seller, receiving zero. This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale. Obtain from a title company or Closing Attorney's office, depending on what state your property is in. In Georgia, Closing Attorneys would be able to prepare the Preliminary HUD-1.
(Please note that if you have been approved for a HAFA Short Sale, you may be entitled to $3,000 at closing, and if you were approved for the Cooperative Short Sale program, you may be entitled to receive $2,500 at closing). Please contact us for more information about these programs.
· Hardship Letter
The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
· Documentation supporting the hardship (termination of employment letter, disability letter, doctor bills, etc.)
· 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.
· Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.
· Two most recent bank statements and retirement account statements. Be sure to copy both sides of double-sided statements. · Two years of tax returns and W-2's. Remember to provide signed copies of tax returns.
· Two most recent pay stubs
· Current debt, payments and a household budget
· Signed IRS Form 4506 "Request for Copy of Tax Form". This is so that the lender can verify that the submitted returns actually match the originals sent to the IRS.
· Copies of Bank Statements
If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
· Current Comparative Market Analysis (CMA)Your lender will order and coordinate this with your Real Estate Broker or Appraiser. Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a Comparative Market Analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
o Active on the market
o Pending sales
o Solds from the past six months.
· Executed Purchase & Sale Agreement & Listing Agreement
When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections. (Also attach buyer's proof of funds or loan commitment (Pre-Approval Letter)).
