Prior to pursuing a short sale, it is always advisable for the seller to obtain both legal and tax advice so they are aware of any legal or tax consequences which may arise as a result of the short sale.
The next thing the seller should do is hire a real estate agent – who is experienced in short sale transactions – and can help the seller find a buyer and assist in putting together the “Short Sale Package” (discussed above) to send to the lender.
This package will contain most, or all of the information the lender will need to make a determination about whether to approve the seller’s short sale request including information about the buyer and the buyer’s offer to purchase the home.
The Short Sale Package:
While each lender is unique and may have differing short sale guidelines, most will require the seller to provide some or all of the documents listed below which the seller’s Realtor will help prepare:
- Purchase Contract Outlining terms of buyer’s offer to purchase home
- Hardship letter outlining seller’s specific financial distress or hardship
- Letter of Authorization permitting Realtor to speak directly to the lender
- Financial Documents outlining seller’s household income and liabilities
- 2 Months Bank Statements
- 2 Months Pay Stubs
- 2 Years Tax Returns
- List of Seller’s Monthly Expenses
- Realtor Listing Agreement
- Preliminary Title Report from Title Company
- Multiple Listing Data Sheet
- History of Showing Feedback and Activity on the home
- History of Price Adjustments on the Home
- Comparative Market Analysis on the Home
- HUD-1 from the Title Company showing total proceeds from sal
Lender Review of Short Sale Package
Once the package has been sent to the lender, it will be assigned to a Bank Negotiator. The Negotiator’s job is to essentially crunch the numbers and determine the following:
- Does a true hardship case exist for the seller?
- What is the current market value of the home?
- What does the seller owe on the loan?
- How much is the buyer willing to pay for the home?
- Is this a fair priced offer?
- Would the bank net more money if they simply foreclosed on the home and sold the home themselves as a bank owned or REO property?
This is why the process can take 60-120 days and why buyer’s often walk away prior to the bank making a final decision.
After reviewing the package, the Negotiator has a number of choices:
- Accept the short sale and purchase contract as-is.
- Accept the seller’s short sale request but reject the current purchase contract. In this case, the Negotiator can counter the buyer’s offer and the buyer must agree to pay the bank’s counteroffer price if they want the property.
- Reject both the short sale request and the purchase offer meaning the seller has failed to convince the bank or their hardship or the bank feels they will make more money by simply foreclosing and selling the home themselves.
