An important part of the short sale package is having the required information such as: when the property was put on the market, the name of the brokerage that initiated the listing, the duration of the listing, and the amount of commission received in the process.
Buyers should not submit an offer that is substantially lower than the asking price, especially if the home has only been on the market for a short term.
If a buyer submits an incomplete contract, he or she should expect substantial delays to the short sale process. Ensure that the contract is completed in full, with the property address accurately listed, all sections requiring signatures and initials filled out, and the contract correctly dated.
The majority of banks will accept electronic signatures on short sale purchase contracts, but not every bank may be willing to do so. Borrowers may need to finalize their purchase contracts in person.
With very few exceptions, short sale packages must contain a seller’s hardship letter, explaining the circumstances that led up to the homeowner’s inability to keep current on mortgage payments, whether financial or otherwise.
Hardship letters should also contain what attempts the homeowner has made to alleviate the situation and justification for the failure of these attempts. Furthermore, it must include the loan number with a date and signature.
The authorization letter is a written document signed by the seller that gives the bank authority to exchange information with the listing agent regarding the seller.
Without authorization, the real estate agent will be unable to negotiate the short sale. However, some listing agents choose to submit the authorization upon listing commencement, rather than in the short sale package.
The short sale package must include his or her two latest bank statements. If any large sums are present on the statements, whether deposits or withdrawals, a legitimate explanation may be required of each transaction.
Borrowers must present their federal tax returns for the past two years for evaluation. These forms should be signed and dated, for each schedule on every page.
Borrowers who have not filed tax returns within the last two years will be obliged to present a letter of explanation and documentation to substantiate any granted extensions.
During the verification process, the bank will need documentation to support the borrower’s income, typically through two years of W2 forms, which disclose salary as reported to the IRS. Self-employed borrowers must submit 1099 forms, as well as a statement of profit vs. loss.
Whether a borrower receives paychecks monthly, bi-monthly, or weekly, he or she will need to send in his or her two latest payroll stubs in the short sale package.
If borrowers receive any additional funds, such as bonuses or any other atypical growth of salary, they should be presented an explanation of this supplementary income.
In finalizing a short sale package, borrowers must provide an HUD-1 form, which contains information relevant to the projected closing of the sale, including: the property address, the sellers’ names, buyers’ names, and anticipated date of closing. HUD-1 documents are fairly complicated and generally are prepared by a designated closer or an escrow officer.
If you believe that the bank may deny or attempt to counter the proposed sales price, request that your real estate agent submit a comparable market analysis (CMA), which includes a list of comparable home sales to justify the sales price.
If the home needs renovations, include several repair estimates. However, understand that the bank will select the cheapest option of the provided estimates.