Submitting The Short Sale Package
Back in the early 2000s when short sales were scarce and uncommon, short sale agents were forced to deliver completed short sale packages via FedEx, UPS, or sometimes even in person, depending on where the short sale lender was located concerning the home. As a short sale agent in Orlando, I did this to ensure the lenders would receive the package because banks would routinely lose or would claim they “never received it”, probably because they were outsourcing their short sales to 3rd party short sale processors. It was very frustrating, to say the least…
Although Bank of America was the first one to have the ability to receive shorts ales via upload, many of their competitors still required us to fax them over, and over… and over. As the years went on, through the implementation of online software and loss mitigation departments becoming more familiar with short sales, the short sale process became more streamlined and where being processed a lot faster.
These days some lenders will only accept documents if you upload them to their online processing platform. You must speak to someone before submitting the package so you know exactly what they need and how they need it. If there’s only one document missing, it will hold up the entire process.
Documents Needed for A Short Sale Package
Nowadays most lenders will have their short sale package with their company logo. It’s best to just follow along and submit the docs exactly how they ask for them.
This is a list of documents required by all lenders to be considered for a short sale:
Listing Agreement: The short sale lender will need proof the property is listed by a licensed real estate agent at the current market value. The listing agreement must be signed and list the terms of the listing, the name of the brokerage and the amount of commission to be paid. It’s never a good idea to lowball the bank so make sure the offer price is close to the listing price, they aren’t stupid and it could cause them to reject the file altogether.
Purchase Contract: Note: Not every lender will accept a contract that’s been signed electronically. They may require you to have “wet signatures” on the contract so find out the requirements beforehand. Make sure the property address is written correctly and every line has initials and signatures where needed so there aren’t any delays.
Hardship Letter: Writing an effective hardship letter is probably the most important part of the short sale package. It should tell a detailed story about how the homeowners got into their current situation and why they can no longer afford to pay the mortgage. Whether it’s because of loss of employment health problems or divorce, leave nothing out. The hardship letter must have the loan number on it, signed and dated by the homeowner.
Letter of Authorization: This is the letter in which the seller authorizes the agent to speak with the lender on the seller’s behalf. As a short sale realtor in Orlando since 2004, I prefer to send in the authorization letter as soon as I get the listing agreement so I can establish communicate easily with the short sale lender before sending in the package. However, for some unknown reason, many short-sale agents will wait to send it together with the complete package.
Bank Statements: Every short sale lender will want to see your last 2 bank statements for every account you have and don’t leave out any pages as this will delay your file. If there is any unusual activity on the account like large deposits or withdrawals, I suggest you make a note to the short sale processor explaining why. Put out the fire before it starts…
Last 2 Years Tax returns: The short sale lender will also want to see your past 2 years of federal tax returns, dated and signed, on every single page. If for some reason you haven’t failed, you should write a letter explaining why.
Last 2 W-2s or Profit and Loss Statement: The lender will require you to send in the past two years of w-2s disclosing your salary. However, if you’re self-employed, you’ll need to send in a profit and loss statement. If you’re not self-employed, you should also send in your payroll stubs supporting the w-2s. Explain any bonuses or other pay increases if applicable.
Preliminary HUD Statement: The preliminary HUD statement should be prepared by the title company that will do the closing. It contains all the details of the property such as a legal address, seller’s names, buyer’s names, and the estimated closing costs. It will break down all the costs of the transaction including the sale price, mortgage payoffs, real estate commissions, taxes, insurance, etc.
The CMA [comparative market analysis]: Your short sale agent should also prepare a comparative market analysis to be included with the short sale package. It’s a report of comparable homes sold in the same area. A CMA report should justify the offer price and should be included if the offer price is less than the listing price.
Contractors Estimate: If the home requires some repairs to make it livable or even minor repairs, it’s always a good idea to include a contractor’s estimate of how much it will cost to make the repairs. If you want to be thorough, you should get 3 estimates from different contractors.
Short Sales Aren’t Guaranteed
Keep in mind that there is never a guarantee when it comes to short sales. Just because you followed all the steps and did everything the lender asked of you, there’s still a chance that your short sale will be denied by the lender. If this happens, don’t give up!
If you have an experienced short sale agent in your corner, they won’t give up either. Sometimes it takes some negotiating and jumping through a few more hoops to get it done.
