The easiest way to understand the Short Sale process is to think about qualifying for a mortgage. When you apply for a mortgage, the lender reviews your recent bank statements, pay stubs, tax returns, etc. to determine your ability to repay the mortgage.
When you apply for a Short Sale, it’s like undoing a mortgage. The lender will want to see the same documentation, along with a hardship letter, to determine your inability to repay the mortgage. If you can do this successfully, the lender will likely approve a Short Sale.
Below is a list of documents that comprise a complete Short Sale package:
• Bank Statements for prior two months
• Pay Stubs for prior 30 days
• IRS Tax Returns for prior two years
• Hardship Letter
• Authorization to Release Information
• Residential Real Estate Listing Agreement
• Executed Purchase Contract
• Lender Pre-approval Letter for Buyer or Proof of Funds for cash offers
• Preliminary Settlement Statement
Some lenders may require other documents such as an Arms-Length Affidavit and a Short Sale Contract Addendum which they will provide.
If the package arrives for lender review incomplete, oftentimes the lender will just move the file aside and pick up the next one on the stack. If the real estate agent isn’t diligent about following up with the lender, your file could just sit on the lender’s desk indefinitely with no action being taken. In the mean time, you’re moving ever closer to foreclosure.
The important thing is working with a REALTOR® who understands the process, knows the proper documents to gather, knows how to submit a complete package, and regularly follows up with the lender.
Based on The Field Guide to Short Sales. Copyright © 2010 by Tom Branch & Gina Branch.
Originally posted at: http://www.thebranchteam.com/wordpress/2010/09/07/short-sales-101-%e2%80%93-anatomy-of-a-short-sale-%e2%80%93-part-2/.
We are not the FHA, VA, USDA, HUD or any other government organization. The content on this blog is intended for information purposes only.
Good piece. About the arms length affidavit: What I wonder is, what would the banks seek for “damages” if they did persue going after someone who signed the affidavit but then rented back. Had they not signed the affidavit, would the bank have made more/lost less money? I certainly don’t think so. I am anxious for someone to force the issue and have it brought to courts. I don’t see banks finding out(A), and (B), if they did find out, would they really want to take it to court which could end up with a judgement not in their favor that could create a wave of strategic defaults for people to stay in their home for less money?
I was pondering the idea and shot this vid with an attorney: http://www.youtube.com/watch?v=Nex_q-E7tO0