What’s in a Short Sale Package?

March 10, 2009 by  
Filed under Short Sale How To

package-70x70You want to make the entire short sale package extremely easy to review, because you are presenting it to a loss mitigation negotiator who is overworked and underpaid. Look at the entire package from the negotiator’s point of view, and make it easy to recommend it for approval. If you put in everything necessary, in a format that is easy to review, you are much more likely to get an approval. For example, put the loan number on every page of the package. It is an administrative pain for you, but it is a sign of courtesy for the negotiator who will know that you are experienced and considerate. This will also prevent some of your papers from being lost. Similarly, include a recent mortgate statement from the lender so that the loan is easy for the negotiator to identify.

Find out what this lender wants in the package and give them everything they want, and no more. Some of the lenders put their requirements online, like the package for EMC. Compare this to what Aurora requires by clicking here . Bank of America does not want all this stuff, as they get too many short sale applications for the size of their staff. They ask for a HUD-1, financial information on the seller, a hardship letter and a letter authorizing them to talk to you. Other lenders will send you their requirements by fax or email. Still others will play “guess again” by telling you to send in a package, then telling you that you did not send in what they wanted. Let’s look at the items normally required in a short sale package.

I start my package with a trial brief that begins with a summary of what is in the package and points out why every element submitted supports a short sale. At the end of this trial brief, I include any problems with the property that make it evident that the lender would not want to foreclose on the property. The most dramatic are mold, toxic material, a former meth lab and dangerous illegally built structures are all hazards that the bank will not want to have to sell, because even though they sell a foreclosed property “as is” the bank will still get sued. My favorite was a series of illegal retaining walls nearly three times the height allowed by the zoning regulations that were so poorly built they were leaning from the weight of the illegal grading heaped on them. If you have these items, include some compelling presenation, such as pictures or bids for the cost to remedy the problems. In other words, this trial brief frames the review and leads the negotiator to the conclusion that approval of the short sale is in the lender’s best interest.

The most important part of the short sale package is the hardship letter, so I put it before all the other materials to set the tone of the review. It is so important that it is covered in a separate post “Do a Compelling Hardship Letter.”

The next part of the package concerns the offer. I put in a one page summary of its essential terms. The negotiator deals with contracts from all over America, so do not make them dig out the essential terms from a long contract. Include the entire contract, and make sure it is completely executed by all parties. You are dealing with administrators who check every signature and set of initials. I have even had ASC, the lender, say they would not accept electronic signatures on the contract in the short sale package even though the closing attorney said electronic signatures were legally valid.

The loss mitigation negotiator gets the best understanding of the offer from the HUD-1 settlement statement. It must show the estimated payment to the lender i.e what you want the bank to settle for. I put a large arrow by that number to make it easy for the reviewer to find it. The tips for preparing the HUD-1 are covered in a separate post “Do an Accurate Closing Statement.” An essential part of the presentation of the offer is a pre-approval letter showing that the buyer is sure to get the financing. The loss mitigation negotiators are sensitive to the recent trend of short sales being approved for deals that do not close. So, prove that this one will close. For cash buyers, include a letter from the bank manager saying the cash is in the bank, or a bank statement showing a balance large enough to close.

The next part of the package deals with the marketing of the property. The negotiator needs to know that the property was fully exposed to the market. Enclose a copy of the listing agreement. Since the new Fannie Mae policy says that the banks should not cut a commission so long as it is not above 6%, I would suggest a commission not to exceed 6%. A summary of the history of the listing helps by showing the date listed and the original listing price, then the date of any price reductions. If you started marketing the property at a price that would pay the bank in full, point that out to indicate that you tried to get the lender fully paid, but the market would not support that price.

The next group of items concern the financial qualifications of your seller. The bank will normally want their own financial statement filled out. Since the negotiator is used to reviewing that form, it is much easier to review the bank’s form instead of your form. You want the financial statement to show that the seller is not able to cover the monthly expenses, so that the negotiator will conclude that the seller cannot afford to keep on paying the mortgage. If the seller is self employed, you may need to send two years of tax returns. Some banks will want tax returns even if the seller is not self employed. Be susre to include all the schedules that are part of the tax return. Normally, the last two pay stubs are required for a seller who works for a firm, while a recent profit and loss may be required for a self employed seller. Be sure to check to see how many pay stubs covering what period of time the lender wants, and avoid delays by getting it right the first time. This part of the package finishes with the last two month’s bank statements, or however many statements the lender requests. Be sure to discuss any large deposits on those statements, particularly if the seller took those funds out of a retirement account. You do not want the negotiator to get the wrong impression that there is a large income when there is not.

You should have sent in the letter of authorization for the bank to talk to you before you send in the package, so that it can be reviewed and approved. Include another copy with the package to make it easier for the negotiator.

Remember the rule about not submitting anything the lender does not request? You break that rule if you have good market statistics in a graph or other visually compelling medium that show the market is declining rapidly.

Most loss mitigation departments will require you to fax this entire package to a particular number. Set your fax on Fine, so the quality of the documents is better. Also, you may have to fax in the middle of the night to avoid a constant busy signal. If you have a problem getting the fax to the loss mitigation department, ask to talk to a supervisor then see if you can fax it to her fax machine.

Whatever you do, send the entire package by mail, with a signature required. They may tell you they only accept the package by fax, but mail it anyway. You want the signature to prove that it was received. My record is faxing a package four times to ASC, having confirmation from my fax machine that it was received each time , only to have them claim it was not received. If they know there is proof of receipt, you will avoid this problem.

Providing a complete short sale package makes it much more likely that your offer will be reviewed more quickly and greatly increases you chance for lender approval.


32 Responses to “What’s in a Short Sale Package?”
  1. I am happy to have found your site. The information is right on and groovy. Keep up the good work and I will keep coming back to visit.

  2. I found your blog because I wanted more information on your expertise. I run a blog and I am looking for good content to link to for future posts. I like you site so I am adding you to my google reader.

  3. streaming says:

    Very interesting post. I’ve found your blog on Google, and I’ve been reading some useful information on it. Keep up the good work.

  4. spodnie says:

    Very informative post. Thanks for taking the time to share your view with us.

  5. Damn, very nice website. I actually came across this on Bing, and I am really happy I did. I will definately be revisiting here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment.

    Thank You

    watch movies online

  6. Exactly where did you aquire your design?? It’s brilliant!

  7. Took me time to read all the comments, but I really enjoyed the article. It proved to be Very helpful to me and I am sure to all the commenters here! It?s always nice when you can not only be informed, but also entertained!

  8. Thanks so much for this information ? I?m already doing some of these suggestions but there are many others that are new to me.

  9. Interesting article. Were did you got all the information from?

  10. Vimax says:

    I can see that you are putting a lots of efforts into your blog. Keep posting the good work.Some really helpful information in there. Bookmarked. Nice to see your site. Thanks!

  11. Vimax says:

    What youre saying is completely true. I know that everybody must say the same thing, but I just think that you put it in a way that everyone can understand. I also love the images you put in here. They fit so well with what youre trying to say. Im sure youll reach so many people with what youve got to say.

  12. Thanks for your informative post! 🙂

  13. I was looking for more information on your subject and found your blog. I really think you have a nice looking blog. It has a nice design and layout. The content is exceptional and that is really the most important. I have added you to my google reader and look forward to reading more. It is impressive.

  14. Found this blog typing in ‘search marketing’ on Google. I was looking for some ideas for a post, and I basically wrote a short “summary” of your post. Don’t worry – I gave you credit with a link 🙂

  15. Awesome blog you have here. I was wondering where you found the website design for the site? Looks pretty nice, great find!

  16. Fantastic article, I have saved this web-site so with any luck , I will see a lot more on this subject matter in the foreseeable future!

  17. Ian Brady says:

    Took me time to read all the comments, but I really enjoyed the article. It proved to be Very helpful to me and I am sure to all the commenters here! It’s always nice when you can not only be informed, but also entertained!Cheers!

  18. Nice post. Thanks for sharing. Keep it up!

  19. Thank you for another fantastic posting. Where else could anyone get that kind of information in such a perfect way of writing? I have a speech next week, and I was looking for more info 😉

  20. Kasyno says:

    Thank you for another fantastic posting. Where else could anyone get that kind of information in such a perfect way of writing? I have a speech next week, and I was looking for more info 😉

  21. Great site, figured out a few new things! Subscribed RSS for later, hope to see more updates like this one.

  22. Nice post. Thanks for sharing. Keep it up!

  23. I find myself coming to your blog more and more often to the point where my visits are almost daily now!

  24. Took me awhile to read all the comments, but I really love the article. It proved to be very helpful to me and I am sure to all the commenters here! It’s always nice when you can not only be informed, but also engaged! I’m sure you had fun writing this article.

  25. I was very encouraged to find this site. I wanted to thank you for this special read. I definitely savored every little bit of it including all the comments and I have you bookmarked to check out new stuff you post.

  26. Edda says:

    Noticed your blog on del.icio.us today and truly enjoyed it.. i saved as a favorite it and will be back to check it out some more later .. As a Noob, I am consistently seeking online for articles and reviews that can help me. Many thanks! Respectfully, Edda.

  27. Damn, very nice website. I actually came across this on Bing, and I am stoked I did. I will definately be returning here more often. Wish I could add to the post and bring a bit more to the table, but am just taking in as much info as I can at the moment.

    Thank You

  28. Whats up man, I really like your website setup. What website software are you using on here? Where can I get a link to download it? Thanks!

  29. The web design looks good. What is it called

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!

Powered by WishList Member - Membership Software