Short Sale Docs-Don’t pack away what you will need!

By mark-slade December 5, 2011

Having had success with several short sales (my last listing took 18 days to get UC), I wanted to outline How the process generally goes, especially since if you are moving out of the “shorted” home, you will need to make sure you keep certain paperwork available for immediate access.

So, let’s say you currently owe more to your mortgage lender(s) than your home is worth and you are wondering what to do? Your options are to find out if a Loan Modification will allow you to keep your home as a first consideration. Your remaining options all pertain to moving from your current home and range from selling to a “deed in lieu of foreclosure” to filing bankruptcy to create a prolonged stay in your home to allowing your home to go to Foreclosure and Sheriff’s Sale.

If you are hoping to either stay in the home or feel that it would be best or necessary to move and you want to entertain a short sale, here is a list of many Hardships that can often qualify for HAMP/HAFA loan modifications or short sale approvals:

1. Illness
2. Loss of Job
3. Reduced Income
4. Failed Business
5. Job Relocation
6. Death of Spouse or C0-Borrower
7. Death
8. Incarceration
9. Divorce
10. Marital Separation
11. Military Duty
12. Reduced Income
13. Medical Bills
14. Damage to Property (natural disaster or unnatural)
15. Adjustable Rate Mortgage Reset- Payment Shock (uncommon, but we will see more lenders accept this in the future)

In the case of a short sale, you will have to market your home as you would a traditional sale by hiring an agent (they really need to be either SFR or CDPE designated–having trained knowledge of the short sale process). You will have to prepare a short sale Hard Ship Letter, authorize your Realtor and your Real Estate Attorney (who must also have proven experience with short sales) to have “Third Party Authorization” to speak with the bank(s), and also provide updated mortgage statements. This is needed up front to get the process moving.

However, there is a great deal more paperwork that will be required when you have an accepted offer and the irony is that if you are in the process of moving or have moved out already, you may have packed this paperwork up. So, in order to keep these files at the ready, here is the additional paperwork that the banks will need:

A.Financial Information
 1. Tax information
 2. Two most recent 1040′s
 3. Two most recent W2′s
 4. 60 days of current bank statements
 5. 30 days of current pay stubs or commission check stubs
 6. If self employed-pay stubs or YTD profit and loss statement
 7. Monthly budget/financial statement signed and dated same day as P&S

B.Hardship information
 1. Hardship letter dated signed same day as purchase contract
 2. Any docs supporting the actual hardship
 3. Medical bills
 4. Child support or alimony payment information.
5. Divorce decree or child support order

C.Mortgage & Other Relevant Property Information
 1. 1st Mortgage statement
 2. 2nd Mortgage statement if applicable
 3. Recent Real Estate tax bills
 4. Recent condo association bills if applicable
 5. Any recent water or sewer bills

D.Other Pertinent Documentation
 1. 3rd Party Authorization form
 2. Signed Short sale disclosure (provided by realtor)
 3. Waiver of conflict if representing the buyer (dual agency and also provided by realtor)
 4. recent comps
 5. Listing agreement
 6. Offer/P&S
 7. Listing history
 8. Buyer proof of funds letter or Pre Approval letter

It is important to understand that the above documents are required for almost every short selling bank. There are also bank specific forms that, in most cases, must accompany the above. You may contact your negotiator or the bank directly to obtain the bank specific documents. However, if you make an attempt to structure a document checklist with the above documents and systematically approach every short sale file with the idea of fulfilling that checklist, you will soon see that the short sale process will be one which will prove to be lucrative. The end result will be a happy buyer, seller, production team and, of course, bank negotiator. After all, a systematic approach to the short sale process will alleviate the negotiator throwing the file back on your desk for deficient information. In fact, they will be eagerly awaiting the next file with your name on it!

If you have any questions about the above information, please feel free to contact me:

Mark Slade, SFR
Keller Williams