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Questions to ask sellers:
• Have you received a notice of trustee sale? If so, when?
• Are you currently in bankruptcy proceedings or planning to file? Trustee approval will be required.
• Are you in credit or debt counseling?
• Have you recently been approached by any investors who’ve indicated they can help the situation?
• Are there any other co-signers on the note(s)? Each co-signer must submit the same information as the owner.
Checklist:
• Assess the value of the home under current market conditions.
• Determine all the liens on the property.
• Total the liens, obligations and costs to sell the home.
• Speak with the lender in loss mitigation – there may be other options besides a short sale.
• Locate the original mortgage paperwork. This allows you to address any changes that have taken place since the property was purchased, in areas such as qualifying income, employment, assets, appraised value, etc.
Required documents from sellers for proof of short sales:
• Authorization letter – allows the lender to speak with the Realtor.
• Payoff request to the lender.
• Proof of valuation – an appraisal, BPO or agent CMA showing the property’s value based on current sales, condition of the neighborhood, property condition, and any necessary repairs.
• Estimated net proceeds sheet – should include commissions, closing costs, payoff amounts, interest due, late fees, etc.
• Hardship letter – a complete description and timeline of the facts that created the current circumstances. The lender must be given a valid reason to consider accepting less than what is owed. The circumstances must be unavoidable, such as loss of job, death, divorce, disability, serious injury, etc.
• Pay stubs – stubs are required for a minimum period of 30 days, and include a year-to-date amount.
• W-2 and 1040 forms from the past two years.
• Bank statements from the past two months.
• Other Assets Sheet – including the most recent quarterly statements for all retirement, stock, CD and money market accounts.
After all this information is in hand, it’s a good idea to create a budget. The bank is going to do its own budget from the provided information. If the sellers do a budget to show limited disposable income, it makes the entire package stronger.
Other documents to include:
• Most recent escrow analysis – This is to evidence all liens and show the lender whether past-due taxes or any other encumbrances exist.
• Copy of listing agreement – The lender must approve the listing. The lender will probably call for adjustments, most likely with a commission reduction.
• Copy of fully executed contract – The lenders will generally consider the package only when an offer is on the table. They may also call for backup offers.
Remember:
• Give an estimated closing date. The time frame for closing is one of the lender’s top considerations; the sooner, the better. This is a catch-22, though, since the process is generally extremely slow.
• Full disclosure and honesty is a must. The package demonstrates why the sellers are unable to keep up their mortgage loan payments.
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