The documentation you'll need to accomplish a short sale.
While many lenders will have varying requirements and may demand that
a borrower submit different types of documentation, the following should
be treated as a guideline of what is required in a pursuing a short
Contact your lender immediately
You need to make the effort to find the right person responsible for
handling a potential short sale. You want to talk to person in charge of
loss mitigation for the lender, you want a supervisor's name, the name
of the individual capable of making these kinds of decisions.
Submit a letter of authorization
Your lenders will not want to disclose any of your personal information
without written authorization to do so. If you are working with a real
estate agent, closing agent, title company or lawyer, you will receive
better cooperation if you write a letter to the lender giving the lender
permission to talk with those specific interested parties about your
loan. You should include the following information: name, address, loan
number, third party agents involved and contact information on both the
agents and yourself.
Preliminary estimate of your lenders proceeds
A preliminary HUD-1 settlement statement that indicates the sales price
you are under contract for and all the costs of sale, unpaid loan
balances, outstanding payments due and late fees, including real estate
commissions, if any. Your third party agent (realtor, title company or
lawyer) should be able to prepare this for you. The bottom line should
not indicate any net proceed to the seller.
Your circumstances, in the form of a hardship letter
A complete description of the facts that brought you to financially
challenging situation and why you have a valid reason for the lender to
accept less than full payment. Lenders can understand many circumstances
are unavoidable, loss of job, death, divorce, etc., but they are not
very compassionate to situations involving dishonesty, misrepresentation
or criminal (or criminally negligent) behavior.
A complete financial statement
Be truthful about your current financial situation and disclose your
assets and liabilities. Provide information on savings accounts, money
market accounts, stocks or bonds, cash, real estate or anything of
tangible value. Your lender will need to be assured that you cannot pay
back any shortfall in the short sale transaction.
Proof of valuation
Many homeowners caught by the current downturn of the real estate market
have lost significant equity in their home. This should be part and
parcel as to why you cannot sell your home for enough to pay off the
existing lien. You need to substantiate this value to the lender through
a proof of valuation. In declining value to the lender you could present
a fully completed appraisal, a comparative market analysis (CMA) or a
broker’s opinion of value.
Your purchase agreement and listing agreement
The lender should want a copy of the executed offer, along with a copy
of your listing agreement. Be prepared for the lender to renegotiate
commissions and to refuse to allow payment of certain items such as home
protection plans or seller concessions inspections.
If your package is complete, the facts are accurate and the
circumstances speak for themselves, the lender will approve your short
sale. Within the ongoing communications and negotiations, you should ask
that the lender not report any adverse credit references to the credit
reporting agencies, although they would be under no obligation to
accommodate this request.