Banks all require that you provide them with a certain set of documents in a Short Sale package. The following are the documents that most banks all require before they entertain a Short Sale
1.) A detailed explanation from the homeowner that explains the hardship that caused them to miss payments along with an explanation of the steps they have taken to rectify their situation.
The letter should begin by identifying the property, including the loan number, and a formal apology for ending up in this situation.
Next, have the homeowner explain in detail what led to the missed mortgage payments. Were there expensive medical costs? Did the homeowner lose their job? Perhaps they retired, which reduced their monthly income significantly. Did they have an adjustable rate loan that adjusted up? Did the home end up over-leveraged? Was the homeowner forced to move to to a job transfer, and the house is sitting unsold? These are all examples of acceptable hardships that should be detailed in the hardship letter that is sent to the Loss Mitigation Department of the Lender.
Also include a description of any efforts the homeowner has made to resolve the problem. Has a new job been found? Have they eliminated all discretionary spending?
2.) Two most recent pay stubs for each job held by all members of the family contributing to the household income. This includes pensions, regular draws from an annuity, commission income over the past two or three months, child support, alimony, etc..
3). If the homeowner is a business owner, they should also send a balance sheet and a profit and loss statement to the Bank.
4.) The bank also needs the last two months’ banks statements to get an idea of what your spending habits are like. Homeowners with lots of credit card debt might be able to get a debt counselor to work with the Lenders in order to lower the payments of perhaps forgive some of the debts altogether.
5.) The homeowner’s tax returns from the last two years. This will provide the Bank with a clear picture of the homeowners’ ability to pay their debts and their overall financial stability. The lender can also see from these all assets that the homeowner might have in case they decide to foreclose and pursue a deficiency judgment on the homeowner.
6.) A realistic budget. If the budget comes out plus or minus $300 of even on the average month, it may be possible to restructure the budget so the homeowner can save the house if they prefer to do so.
7.) A listing agreement with a price. The real estate agent should include their normal commission and closing costs on the listing agreement. Lenders who approve Short Sales also pay for the commissions and most other closing costs.
8.) Your offer. You should also provide the bank with your power of attorney that gives you the ability to negotiate with the bank and list the property with a real estate agent on the owner’s behalf. If you don’t have the documents, you won’t be able to do these types of deals.
9.) Power of Attorney. You must have an authorization form giving you or your negotiator permission to talk to the Lender. This is actually the first document that you should obtain from the homeowner so that you can obtain any special instructions from the Lender before the Short Sale package is submitted.
Just collect these documents and you are well on your way to getting a short sale done!
Want to find out more about short sale investing? Then visit Bob Massey’s site and learn how to do a short sale for the maximum profit in today’s market.
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