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

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  1. John Martelotti 10/14/2009 05:35 PM
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Topic:
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Comments 34 New Comment

Show All Comments
Rainer
36,312
Steve Andrascik
Lake Mead Area Realty

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

September 26, 2009 12:23 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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!

September 26, 2009 01:31 PM
Rainmaker
286,352
Martin Kalisker
Weichert, REALTORS - Synergy: MA Real Estate & Mor
WEICHERT, REALTORS® - Synergy

wow! two featured listings in one day.  Congratulations.

September 26, 2009 03:25 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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?

September 26, 2009 03:46 PM
Rainmaker
908,191
Bill Gassett
Metrowest Massachusetts Real Estate
RE/MAX Executive Realty

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!

September 26, 2009 03:51 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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.

September 26, 2009 04:02 PM
Rainmaker
189,603
Jirius Isaac
Real Estate & loans in Kenmore, WA
Isaac Real Estate &TriStar Mortgage

I am with all of you.  Thanks.

September 26, 2009 11:32 PM
Rainmaker
807,814
Lyn Sims
Schaumburg Homes
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago

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

September 27, 2009 01:06 PM
Ambassador
1,234,071
Kathleen Daniels
San Jose Homes for Sale - Probate Specialist
KD Realty - 408.972.1822

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.

September 27, 2009 04:33 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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.

September 27, 2009 07:04 PM
Rainmaker
234,648
Jenny Durling
For Los Angeles real estate help 213-215-4758
L.A. Property Solutions

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!

September 27, 2009 08:54 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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

 

September 27, 2009 11:29 PM
Rainer
20,976
J.T. Thomas
American Horizon Real Estate

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

September 28, 2009 04:28 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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!

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

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

September 28, 2009 09:30 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

Mark --- glad to be of help!

September 28, 2009 09:45 PM
Rainmaker
1,091,891
Evelyn Johnston
Super Agent, Probably the Best Agent in the Galaxy
Elkhart County Subdivisions, LLC

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.

October 01, 2009 07:50 PM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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.

October 01, 2009 11:17 PM
Rainmaker
147,037
Kathy Opatka
Serving Ocean City, MD, & The Delaware Beaches
RE/MAX CROSSROADS

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

October 15, 2009 10:56 AM
Rainmaker
660,191
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

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.

 

October 15, 2009 06:20 PM
Show All Comments
Rainmaker
660,191

Pacita Dimacali

Alameda/Contra Costa Counties CA
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