SHORT SALE PACKAGE: Make sure it's complete before submitting to the lender

By
Real Estate Agent with Alain Pinel BRE 01367196

It's been discussed, blogged, taught...and it doesn't hurt to revisit it again.

If it appears that the only available option to the seller is to sell the property as a short sale, it is extremely helpful to prepare him on what to expect: what is a short sale, how to qualify for a short sale, what is the process, timelines, how to prepare his property for sale, and forms he needs to complete.

The seller is already in distress and will not be in the best frame of mind. So it helps when a listing agent walks him through the various pieces of information we need to submit to the lenders, and why it is important to provide a complete short sale package.

 

What constitutes a short sale package?

  • Letter of Authorization - signed by the seller that authorizes the lender to convey information to the lisitng agent or the agent's designate reagrding the loan
  • Loan Information - signed by the seller that provides the name of the lender, contact numbers, address, loan number, balance of the loan, and if a notice of default was already filed. A separate form is required for each lender 
  • Loan payment coupon --- one for each lender, showing most current mortgage statement or current balance
  • Hardship letter -- the more detailed the better. Indicate the reason(s) for the default, when the hardship started
  • Seller's personal financials -- this will take time, but this is necessary to provide background info on the seller's finances, current obligations, and ability to meet those obligations. Required are: 
    • Financial statement showing income and expenses  --- include everything that seller pays for (household expenses for food, utilities, car payments, insurance, child care if applicable, etc) and sources of income (salary, etc)
    • Two months' most recent statements for all bank accounts and brokerage accounts EXCEPT information on retirement accounts
    • Two months most recent pay stubs or other forms signifying sources of income
    • Two years most recent income tax returns

INCLUDE Property information

  • Listing Agreement showing the proposed listing price
  • CMA of recent sales in the neighborhood. If there's a chart showing the declining prices, include that witn your CMA to justify the price
  • Summary of repairs. If inspections were done that can validate a lower price, such as pest report that shows a high $$ estimate for repairs, include the estimate
  • Copy of the MLS posting to show how it appears on the MLS. if you have it posted on other sites, include the list and the links, and copies of the posts, provide those too, to show how aggressively you're marketing the property.
  • Your own BPO (broker's price opinion) --- don't wait for a BPO done by someone else. Position yourself as the subject matter expert. It's your listing, after all. Submit your version. It will be good for comparison when the lenders order the BP

 

When to submit the short sale package?

Although most lenders say they won't open a file until there is an offer, lenders differ in their policies. I've submitted packages BEFORE receiving an offer, and received the name/number of someone I can follow up with. The seller can also call the lender(s) and provide the short sale package once contact is made.

 

What to include when an offer is received

Most lenders will want the best and highest offer, and may only want to see the top two offers. Be sure to include:

  • Complete offer with all the necessary signatures
  • Preapproval letter for the buyer
  • Proof that the buyer can complete the transaction
  • HUD statement showing buyer and seller estimates

 

Remember that most lenders will approve a short sale only as a last resort to foreclosure for one or more of the following reasons: 

  • Borrower’s insolvency
  • The proposed purchase price is more than the lender would be able to sell the property after foreclosing on the loan
  • The value of the property has decreased to an amount that is below the loan balance due to local and national economic conditions
  • The property was refinanced at a higher value based on an inflated property appraisal report
  • The property is in such a physical condition that it is not financially feasible for the lender to put it into a marketable condition.

 

And throughout this process, do everything you can to market the property. The objective is to get the best possible offer to make it possible for the lender to accept the offer and approve the short sale. Keep the distressed property owner infomed. Brace him for a long wait.

close

Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. John Martelotti 10/14/2009 05:35 PM
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Show All Comments
Rainer
36,312
Steve Andrascik
Lake Mead Area Realty - Boulder City, NV

Your advice is not only sound, but it is complete from beginning to end. Thank you Pacita.

Sep 26, 2009 12:23 PM #15
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Angelia --- as they say, to get a message across, REPETITION, REPETITION, REPETITION!

Jayne --- short sales aren't going away any time soon. We have to be on top of this at all times.

Steve --- thanks. Appreciate it!

Sep 26, 2009 01:31 PM #16
Rainmaker
292,176
Martin Kalisker
WEICHERT, REALTORS® - Synergy - Brookline, MA
Weichert, REALTORS - Synergy: MA Real Estate & Mor

wow! two featured listings in one day.  Congratulations.

Sep 26, 2009 03:25 PM #17
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Martin --- I like your YOU logo. Speaks volumes on where your focus is. I post to share info and to ask questions. Getting featured is nice --- but where are my posts featured?

Sep 26, 2009 03:46 PM #18
Rainmaker
910,568
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Very nice summary of what you should be submitting to the lender Pacita. Letting the seller, buyer and other agent know the expected timeline is also important as you mention!

Sep 26, 2009 03:51 PM #19
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Bill -- thanks. As you said, educating the client about the timeline is important. Sometimes, they'll say yes, they understand. But like us, they will ask, "Are we there yet?" That's where patience and undestanding go a long way in soothing the injured (as opposed to "savage") beast.

Sep 26, 2009 04:02 PM #20
Rainmaker
191,803
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

I am with all of you.  Thanks.

Sep 26, 2009 11:32 PM #21
Rainmaker
819,273
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

Great overview on the paperwork required. Be proactive and get the ball rolling right away because it's gonna take a long time.

Sep 27, 2009 01:06 PM #22
Ambassador
1,297,224
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - San Jose Probate Agent

Pacita:  Another great post!  You are amazing.  I just took a short sale listing ... and indeed many of the requirements are consistent with all banks... some banks have specific and unique forms. It is always best to double check with the bank(s)!  Thanks for your post.

Sep 27, 2009 04:33 PM #23
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Jirius --- yep, the moe info we share with each other, the better we service our clients.

Lyn --- the time issue is an extremely sensitive one. Our sellers and buyers need hand-holding throughout the process.

Kathleen --- glad to be able to share info. Thanks for the positive reinforcement.

Sep 27, 2009 07:04 PM #24
Rainmaker
235,183
Jenny Durling
L.A. Property Solutions - Los Angeles, CA
For Los Angeles real estate help 213-215-4758

Nice list of what to include. Now if we could come up with a simple way to get the bank to response once everything had been submitted, that would be super. All suggestions on that count would be greatly appreciated!

Sep 27, 2009 08:54 PM #25
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Jenny....I was debating whether to say bwaa-haaaa-haaaah or ROLF in getting a simple way for banks to respond. So I'll SIGH instead.

The only thing I can add is a link to a Short Sale Report that ranks short sale lenders. Here it is: http://www.foreclosureradar.com/short-sale-report

 

Sep 27, 2009 11:29 PM #26
Rainer
20,976
J.T. Thomas
American Horizon Real Estate - Springfield, MO

Great overview! If we could just get these processes streamlined across the nation we would all be in better shape!

Sep 28, 2009 04:28 PM #27
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

JT --- there are shortcomings at each end. I'm sure the loan negotiators have their own stories about what agents submit for their review. So I hope that if we do our part, they'll do theirs!

Sep 28, 2009 04:45 PM #28
Rainmaker
197,630
Mark Velasco
Realty Source, Inc (Luxury Homes Division) - Whittier, CA
Friendly Hills Homes for Sale - Whittier, Ca. Real Estate - Listings

Wow Pacita. Great summary of the short sale process. Keep the info coming.

Sep 28, 2009 09:30 PM #29
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Mark --- glad to be of help!

Sep 28, 2009 09:45 PM #30
Rainmaker
1,164,349
Evelyn Johnston
Elkhart County Subdivisions, LLC - Elkhart, IN
Super Agent, Probably the Best Agent in the Galaxy

Nice post Pacita, and well written to include all the aspects of a short sale.  As a listing agent of short sales it helps tremendously if the buyers agent is aware of the process too.

Oct 01, 2009 07:50 PM #31
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Evelyn --- Thanks. It does help for short sale buyers (and their buyers) to understand the amount of preparation that goes into a short sale, and why we don't expect a speedy response. Guess I should have mentioned somewhere in the post that each loan negotiator probably has 300 + files to review.

Oct 01, 2009 11:17 PM #32
Rainmaker
149,076
Kathy Opatka
RE/MAX CROSSROADS - Ocean City, MD
Serving Ocean City, MD, & The Delaware Beaches

Pacita,

You're on a roll! Thanks for this wonderful, concise info. on Short Sales! I've printed it and stored it in my Short Sale file.

Kathy Opatka

Oct 15, 2009 10:56 AM #33
Rainmaker
661,667
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Kathy ---

Just went to a seminar by David Compton headlined "Navigating the Financial Maze of Foreclosures, REOs and Short Sales"...

Bracing ourselves for more short sales, and how we can present ourselves as counselors and consultants to sellers and buyers. Well worth it! And the price was good: FREE!

Lots of good information. To know more about him go to his website at: www.PracticalResources.net. Go to the tab or topic on "Gifts" for freebies he is giving folks to use.

 

Oct 15, 2009 06:20 PM #34
Show All Comments
Rainmaker
661,667

Pacita Dimacali

Alameda/Contra Costa Counties CA
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