Essentials,Short,Sale,Package, finance, share, loan Essentials of a Short Sale Package


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When you are putting together a short sale package, here are the essential pieces to the package: 
  • Authorization to Release – This gives the lender permission from the borrower to talk to you.
  • Hardship Letter – This is a letter from the borrower to the lender briefly explaining their situation.  Preferably, this is legibly handwritten.  It should only be 5-7 paragraphs and should be written as if the borrower is asking a friend for a favor.  Loss Mitigators are people and ‘dumping on’ them is not a good method to get their approval of your settlement package.
  • Financial Statement – Often, the lender has a specific version of this form.  Use the lender’s when possible.  This is just a overview of the borrower’s income, expenses, assets and liabilities.
  • Recent Pay-stubs – The lender wants to see proof of the current income of the borrower to determine if payments could be made.  Usually, the last 2 pay periods are sufficient.
  • Recent Bank Statements – The lender wants to see proof of the cash assets of the borrower.  Usually the last 2 months of statements is sufficient.
  • Recent Tax Returns – The lender wants to see what the borrower has reported to the IRS for income and expenses.  Usually, the last 2 years of returns is sufficient.
  • Purchase Contract – This is the contract that describes the purchase of the house.  Obviously, the purchase price is going to be less than the amount owed or it wouldn't be considered a short sale.  There may also be ‘seller’ concessions that the lender will need to pay – resulting in a smaller payoff.  The contract should be signed by both the sellers and buyers and should have a clause that says it is ‘subject to lender approval’.  This clause protects the seller from being forced to sell at the specified price when a lender rejects the offer (the seller would need to make up the difference at closing).
  • HUD – This is the settlement statement that shows the expenses of closing and the eventual payoffs that the lender will receive.  The HUD will need to show that the seller will receive ZERO dollars at closing.
These are the essential pieces of the short sale package.  Remember that the lender is being asked to ‘take a hit’, so they will want to make sure that they are not the only ones doing so.  The lender will not want the borrower to walk away with a lot of resources – cash in the bank, lots of extra income, possibly retirement accounts. Also remember that a short sale is an agreement between the borrower (seller) and the lender for the lender to take less than a full payoff.  Any misrepresentations in the package may be considered mortgage fraud.

Essentials,Short,Sale,Package,

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