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Documents required by lenders in order to begin theShort Sale process
 
A Short Sale is a type of real estate transaction wherein a hom
eowner 
 
sells their 
 property
f 
or less
than what they owe the lender.
For most lenders to consider a shortsale, the h
omeowner must be experiencing a financial hardship and
is
unable to maketheir mortgage payments. Also, the mortgage itself has to be upside down;
meaningthat the value of the property
 
has
dropped and hence
there is no equity.
T
h
e lender takes a loss, and any unsettled
 
 balance is usually forgiven. In order to begin the
 process of negotiating and then approving
the short sale, you will need to
submit a set
of documents required
 
 by
most
lenders
. The primary documents are:
•
 
Authorization to Release information
. This
authorization is an importantdocument because it instructs the lender to discuss your loan with a third party, which in this case is your rea
l estate agent who is
help
ing
 
you navigatethe short sale process. The authorization should contain the following
data.
a. Name of all
the borrower 
s
 b. Social security number of all the borrower 
s
 
c. Address of Property
d. Names of lenders/creditors
e. Loan
number 
 
f.
Signatures of all the
 borrower 
s
 g.
Date
 h. Name and contact infor 
mation
 
of your real estate agent
(or whomever you want the lender to release your loan information to)
•
 
Borrowers Financial Statement
. This
document highlights in detail your assets
and liabilities
. It is a worksheet that accounts for 
all your income
and
expenses
. It also should
include your 
 
co
-
 borrower 
s financial information.
•
 
Listing Contract
.
This is
the contract between you and the list
ing agent. It is
needed so
the lender can see that you
r agent has made the effort to expos
e the property to as many potential buyers
 
as possi
 ble in order to received offers
 by placing i
t on the Multiple Listing Service (MLS)
. It also highlights the
 
commission charged by
 
the
real estate agent. Agents are
 
often
 
needed in
order to speed up the process.
•
 
Purchase and Sale
Agreement
.
This
 
is an agre
ement that contains the
accepted
 buyer 
offer. The
contract should be legitimate and must be
signed byall th
e owners
of the property.
A short sale package
is considered incomplete
 
without this document
. Only packages with a contract that has been signed by
 
 both the buyer and the seller 
should be submitted to lender 
.
•
 
Borrowers last two
pay stubs
.
You need to include your two most recent pay
stubs in the short sale package. This allows the lender to easily determine how
much you make and verify your financi
al hardship.
If you are self 
-employedyou can provide a loss and profit report.
For unemployed borrower you must present the latest
 pay stub
available.
 
•
 
Two months of Bank statements
. You need to provide your 
two most recent bank statements. If you have
mo
re than one account, all
the statements must be made availab
le for the lender to review
.
•
 
Last two Tax returns
.
You need to provide your two most recent yearly tax
returns. If you have missed filing your taxes then present the latest availableand create a
 
 personal note to the lender stating the reason
s why
.
•
 
Personal h
ardship letter.
 This
letter must contain
your true financialsituation and the reasons why
 
you need a short sale
.
It
s always better tomention in th
is letter all the steps you had
taken pre
viously to avoid having tosell the house, how getting a short sale
approved is much better for you than
aforeclosure and that you understand that
you will not be getting any proceeds
from the
 
discounted
sale
of the property.
•
 
Comparable Market Analysis
of value (CMA).
 
This is ba
sed on the
characteristics of the property being considered,
the number of similar 
 properties for 
sale and so on;
 
it is the estimate
d current value of the propert
y
.Your real estate agent should prepare the CMA
and submit it with
short sale packet because it helps to give the lender a clear sense of how property valueshave dropped in your are
a, hence the need for the short sale. Once the
negotiation has begun, the lender will usually order a more detailed CMAcalled a Broker Priced Opinion of value (BPO) from a third party company in
order to determine the current value of the property
.The documents listed
above are
the vital documents needed by most lenders to begin
theshort sale
process. However each lender might demand addit
ional documents
,
hence your agent should contact the l
ender ahead of time and get their list of required
short sale documents before submitting the
complete
short sale package.
 
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