The Short Sale Process

The short sale process can vary, but it will generally work as follows:

1) The lender is contacted to discuss the possibility of a short sale and to determine the lender’s process for completing the sale.

2) The seller issues a letter authorizing the release of personal information about the loan and the property to the buyer or escrow agency.

3) The lender will review a settlement statement, which will indicate the proposed selling price, remaining loan balances and itemize all expenses, including real estate commissions and other fees and expenses associated with the closing.

4) The seller will complete a "hardship letter," which will detail and explain all financial difficulties. Lenders will usually want to validate the seller’s financial situation by looking at bank statements, investment accounts, along with examining paystubs and other financial records.

5) The lender will then look to the broker to provide a price opinion by examining the condition of the house and the market value of comparable properties.

6) The lender will then want to scrutinize the purchase agreement to determine if all amounts are reasonable and the real estate commission is acceptable.

Because of the documentation required, the short sale process can be lengthy. But if done correctly, it can work well for all parties involved. The lender avoids the uncertainty of the foreclosure process, the seller avoids a foreclosure on his or her credit report (along with potential bankruptcy), and the buyer hopefully got a good deal on a property.

Considering the complexity of the short sale process, you must be educated. If you are considering a short sale, make sure that you discuss your situation with a competent lawyer and accountant. The more educated you are on the process, the easier the transaction will be, and the better the impression you will make on the lender.

To make things easier for realtors here is the information you will need to do a short sale. Investors can use this guide also there are just a few things that are done differently.

1. Get a list of people in foreclosure or work from your referral base to send letter to potential clients in foreclosure. 2. Talk with homeowners 3. Meet with homeowners in foreclosure 4. Tell them you are a realtor and that you will be contacting the bank to list your property at a discount + your fee. 5. Get paperwork from homeowner to show the bank that there is a hardship.

6. Paperwork includes:

a. Authorization to Release Loan Information

b. Cover letter

c. Listing contract agreement

d. 2 year tax returns

e. W-2

f. 2 Months Bank Statements

g. Hardship letter

h. Personal financial statement 7. Call bank or lender to get loss mitigation number or use the list in this book. 8. Contact loss mitigation and fax over authorization 9. Call 2 days later and make sure the authorization is in their system. 10. Once authorization is in system, send over short sale package to the loss mitigation fax. (Note the fax may be the same for the authorization and short sale package) 11. Wait 3 to 5 days call loss mitigation to make sure they got the paperwork. 12. Meet BPO appraiser at the property to get the price that you need to sell the house at. 13. Once assigned to negotiator, then work with them to get the price you need to sell the property and get the time you need to sell it. 14. Once you get the ok from the negotiator, sell the property. 15. Sometimes in the MLS you will see the agent put short sale contingent upon bank approval. This has to do with the offers, if it is too low the banks will not sell.