What information will the bank need to decide whether to accept a short sale?

[Moe Bedard]

A short sale MUST be accepted by your current lender or servicer in order to proceed with the sale of your home. It is considered a privilege and not a right. So, with that said, one must be prepared to provide proof and evidence that they qualify and deserve a short sale by their lender.

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property.

Your submission package should include:

1. Hardship Letter - explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is unlikely to be considered

2. Proof of employment or unemployment - W-2 forms from employers (or a letter explaining the seller is unemployed).

3. Proof of income - bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. Most lenders will ask if you have an access to a retirement fund, investment fund, 401's, stocks, and how much is accessible and why if these funds are not accessible has to be provided in a written statement.

4. Comparative Market Analysis or CMA Broker Price Opinion or BPO (Mini appraisal) The bank will need comps or a broker’s price opinion showing the current estimated of value of your home. Be very thorough with your Analysis with Closed and then Active listings. Closed comparable are of course what they are looking for above all, but if you cannot find any sold in the last 3 months in the exact same complex or street/block due to the sluggish market, be very detailed with your analysis and calculate by square footage, age, size, views, frontage and upgrades, amenities et...

5. Listing Agreement or Proof of Listing - The Listing Agreement is a Short Sale: any offer is Contingent Upon the Lender’s Buyer’s Approval. The Listing has to be signed and sealed and promoted on the MLS prior to sending your package for short sale consideration to the Loss Mitigation Specialist. Often the commission will have a maximum stated by the Lender/Investor.

Tip: In preparing the package, be careful about discrepancies between the seller’s income and the income used to obtain the loan. A big gap may indicate mortgage fraud, unless employment circumstances have drastically changed

Other Items you want to include in your short sale package.

Cover Letter
Authorization to Release Information
2 months bank statements
Supporting Hardship Info – HOA liens, medical/disability statements etc.
Repair Estimate for the property
Contract
Net Sheet
First mortgage holder may ask for a payoff amount from the 2nd
Second mortgage holder may ask for a payoff amount from the 1st
Lender may ask for an Initial Title Report
FHA and VA may have their own forms and special requirements as well

Research links:
From Realtor.org, Real Estate Blog - Running for a Typical Short Sale Package,

[csb2008]

May I please ask a question regarding a short sale? if you are lucky enough to make it through the above mind field and come out not owing your life! can you please advise as to what is reported to the credit companies? Is there life after a short sale as far as home purshases in the future? Or is the report as negative as a foreclosure?
Thank you so much!
Cindy
My Broker has shared with me the mind fields, but not once mentioned I may be held responsible for any amounts when over?

[12345]

i was in the modification process (black hole) but found out this week i had to take a 50% wage cut and was recently informed that my job could be finished as soon as dec 1. i have first with litton and second with ASC. i found a realtor who said he'd help me with a short sale. i won;t be making the payments since a months worth of paychecks will not cover the mortgage payements.. is a short sale possible or will they foreclose?

[Moe Bedard]

did you call Litton and ask if they will accept a short sale.........

You would need to call Litton and ask what options the investor on the loan has............

Executive Resolution Team
Direct: 1-713-218-4592
Fax: 1-713-966-8852
__________________

[12345]

the realtor said he will do that for me. he says he is well versed and i don;t have to do it. he says he will match me up with a buyer... that is what he does, i meet with him a 3pm. i guess my question was does it change the possibility of the short sale since i won't be paying? but what you are saying is that its up to litton and probably asc...

[CHACHO]

So, the bank can take away your 401K?

[meljane]

Can anyone provide a phone number to Wells Fargo to investigate what they may need for a short sale?

[Moe Bedard]

Wells Fargo
Loss Mitigation
1-877-216-8448

[meljane]

Thank you! I will let you know how it goes.

[Janeen]

Usually a lender will start with an appraisal to find out the current market value and determine a list price. Then a realtor will begin to get offers & submit them to the lender. The lender will decide if they are willing to accept the offer or not.

[JackDinLBC]

Moe,

You had mentioned with the submission package:

Tip: In preparing the package, be careful about discrepancies between the seller’s income and the income used to obtain the loan. A big gap may indicate mortgage fraud, unless employment circumstances have drastically changed

That's something I hadn't thought of. I don't think I even have copy of the application, if there even was one. Everything was done over the phone with the mortgage broker. It was a no doc loan. I know now it's a loan I never should have been in. Could the current mortgage holder come after me for fraud???

I had talked to two separate lawyers about doing a forensic audit of my loan documents. There are several suspicious things about the whole deal. Both wanted a $4-5k retainer to get things started. I don't have that kinda money to spend without knowing the outcome.

The house has no other value to me. There's no reason for me to fight this, so I've gone the short sale route. (see my other post in this forum) I've had a buyer since November. All the paper work has gone into GMAC. Since then I have been told they're waiting on the second, Homecomings, to accept.

[theylive]

I have been late two months now and I am in the process of getting "approved" for a short sale through CW. I told them that I was not going to pay the mortgage during the listing period and they told me that was fine. Will they still send a NOD letter and foreclose on me even if I am trying to work a short sale? In other words, does this by me more time not paying the mortgage? I hope I'm making sense.

[12345]

in my experience it doesn't automatically buy you time. that is up to the bank.. maybe now CW will work you a bit.. I think you are also way ahead of the game... not waiting till the end to try a short sale. Stay on those people... be careful, the people who worked with my on a short sale, only waited until i got my foreclosure papers, then they wanted the title so i could avoid foreclosure.. well according to my att SCAM.. then i woudl have become thier renter...

[miked2023]

I'm with CW, and our income is down significantly (about 33%) but we could still technically afford the house by their standards I'm sure (if we want to be broke for the next ten years). We just went 30 days late and don't plan on making any more payments. Is there a chance they will approve our short-sale? The house is inderwater around 100K.

[Moe Bedard]

CW requires you to have the property on the market for at least 90 days before they will consider a short sale...............if there is multiple liens on the property it makes it a bit more difficult...........

You would need to ask CW if short sale is an option.

[CMA1969]

As of next month, I will not be paying. i have tried for 8 months to get CW, now BofA to work with me. Told by a friend's Uncle who works in the restructure/mod dept after looking at my loan (80/20), he doesnt see BofA ever working with me. I have decided to just walk away but, as a last ditch effort, am meeting with an agent next week who specializes in short sales. What has been the success of people getting a short sale approved with a 30 year ARM, value down 85K, not delinquent? Any input on this situation would be GREATLY appreciated. Thank you much!