How to Put Together a Great Short Sale Package

In most instances, the short sale package represents the commencement of the short sale process by short sale sellers and their lenders. The information included in the package should make a strong case for the why the banks should allow a homeowner facing foreclosure to sell the home below the unpaid principle balance. It is therefore essential to provide not only the required information, yet also the right information to make the strongest case possible.

What should a short sale package include?

Cover Sheet – Given the fact that majority of banks ask that a short sale package is faxed in rather than emailed, the first page of the package should contain short sale property address, loan number, borrowers’ names and last 4 digits of the Social Security Numbers, short sale realtor’s contact information, and any other information that should jump out to anyone first glancing at the package on the short sale lender’s side.

Hardship Letter – hardship letter describes the borrower’s situation in borrower’s own words.

Financial Worksheet – short sale lenders make their decisions, in most part, based on the current financial situation of the borrowers. Financial worksheet contains borrowers’ income, assets and liabilities, as well as a list of monthly expenses.

Paystubs – paystubs for all individuals on the loans covering the last 30 days along with letters of explanation if sellers anticipate a drop in income in the future or have experienced an increase in earnings in the immediate past. If self-employed, profit and loss statement should be provided for the last 6 months.

W2s – at least for the previous year and for all borrowers on the loan.

Income Tax Returns – last 2 years of Federal Tax Returns or proof that extension was filed

Bank Statements – last 2 statements for all accounts, including investment and retirement.

Ratified Contract of Sale (if applicable) – in some instances, as in the case for FHA and HAFA, short sale package is sent in prior to securing an offer on the property. In those cases, this item is omitted.

Preliminary HUD1 (if applicable) – this document shows to the lenders costs associated with the short sale transaction as well as how much money they will be recovering after the short sale process. As in the case of the ratified contract, if there is no offer, HUD1 is omitted from the short sale package.

Pictures/Information about the property – although each lender will most likely do its own valuation of the property, it is advisable to provide them with photos of potential repairs and deficiencies. Is there mold in the basement that will prevent most buyers from purchasing this short sale property? Is the roof and other major components at the end of their useful lives? Is the market in the area tanking and the neighborhood is filled with bank-owned properties? The bank’s short sale negotiator sitting in California or Texas will not know these facts. Yet they are very much pertinent to the short sale case.

CMA – including a comparative market analysis in the short sale package is a good way to potentially anchor the short sale lender to a specific price point. As mentioned above, most lenders will do their own valuation of the property. However, CMA coupled with pictures and qualitative information about the geographic area can serve as a great tool in getting the bank to come up with the right value of the property.

Real Estate Broker Listing Agreement – in a traditional short sale, the short sale package is submitted after the property is active on the market and is listed with a local real estate agent. The listing agreement serves as proof to the lenders that the borrower is making an effort to market the property to the public.

3rd Party Authorization Form – if the short sale is handled by a short sale specialist, the homeowner needs to explicitly state to the lenders that the short sale agent is allowed to discuss the details of the loan and the short sale with the bank on behalf of the homeowner. Some lenders have their own standard forms that must be filled out. Many, however, will allow for the use of a generic 3rd Party Authorization Form.
The items above are the necessary components of a great short sale package. Depending on the type of short sale, there may be some variations of what items are provided and when.

If you’re considering doing a short sale on your home, you can not afford to go in alone. You need the assistance for a short sale team that understands the nuances of this complex transaction and will assist you in getting you through it. Contact us today to put our knowledge and experience to work for you.