Bill Tucker's Real Estate Advice for Realtors & Lenders
Jul 29, 2010
Tip 29-2010: Short Sales & the Short Sale Package
In order to obtain approval of the short sale, each lender requires a complete short sale package be submitted by the Seller. This package includes a hardship letter and financial information from the Seller. Unfortunately, lenders do not allow this package to be submitted until there is a ratified contract. Once everything is in place, the short sale package, ratified contract and a proposed HUD is submitted to the short sale lender or lenders (don’t forget the second lien holder or home equity lender).
The documentation required is complicated and detailed for the Seller, especially if the Seller is experiencing other hardship issues. Accordingly, have the Seller start early preparing the short sale documentation, which typically includes at least the following: hardship letter, written 3rd party authorization, last two pay stubs, last two monthly bank statements, last two years’ of tax returns, & income/expense statement. (Our advice is to start this process at the listing stage.) With this early start, the Seller can have all of the required documentation prepared by the time a contract is signed. Also, remember that even after the short sale package is submitted, the lender may still require updated information.
The goal should be to submit the short sale package with the signed contract and HUD immediately after final contract ratification. In this way the Seller’s short sale application will have an earlier stamp with the short sale lender, which translates into an earlier decision.