Short Sale Paperwork
Cardiology, Classic Cars, and Short Sales….What do these things have in common? Proper assembly is required or things won’t run right.
But, why do they need all this information from me? Think about it this way:
The only information that the lender has from you is what you supplied to them on your application for a loan. This information provided them with a financial snapshot of your fiscal health that they used to give you the loan. It is similar to getting a physical before you apply for life insurance. As in the life insurance analogy, your financial health has changed. Now, you are asking the bank for a favor, to forgive a portion of your debt to allow you to sell your home for less than is what is owed.
Often times, your loan has been sold multiple times to different investors along the way. These investors will wonder what has changed since your loan application and why the discounted payoff is being considered. The paperwork is an audit trail for investors and government regulators alike. It shows a financial hardship that helps your bank make your case to the investors.
So Here is what you need:
* Listing contract (if required by the lender, shows attempts to market the property for sale for X period of time and price)
* Sales contract (often called an Offer to Purchase or a Purchase and Sales Agreement, you need a Buyer for this)
* Hardship letter (this is the narrative that explains the financial data, includes explanations for loss of income
* 2 years W-2’s or tax returns- (Generally speaking, you only need to supply the front 2 pages of your Federal tax returns)
* 2 months pay stubs (Or Equivalent pay information if self employed. If you cannot provide, explain why in your hardship letter.)
* 2 months bank statements
* Financial statement listing current liabilities, assets and income information (We prefer to use the Fannie Mae Borrowers Form.)
* An Authorization to Release Information- authorizing whomever will be negotiating with your lender to speak with them on your behalf.
The goal of all this is to prove to your lender that you truly cannot afford the home any longer, and that you do not have the wherewithal to account for the shortfall. The lender will do an independent appraisal to verify that the home has no equity and cannot be sold for a sufficient sum to pay them off in full. If you can sell your house and pay the lender off in full, you should proceed with doing that, for a short sale is not the right option.
I hope that helps explain the need for all the paperwork. Remember the more complete you are in submitting the proper paperwork, the better the likelihood the loss mitigator will process your request in a timely manner.
