More and more short sales are getting approved in the Big Bear real estate market these days. Banks simply don’t want to take a property back and by completing a short sale the banks save time, money, and they get the property off their books. As a seller, you avoid the stress of a lengthy foreclosure process and you can preserve your credit rating.
What is a Short Sale? A short sale is a procedure in which the borrower is allowed to sell the property for an amount less than which is owed in order to avoid foreclosure of a defaulted mortgage. Typically, this type of sale involves a property that has a value less than the amount the borrower owes on the property and the borrower has a long term, documented hardship.
What will your Lender require in a Short Sale Application?
- An accepted offer from a pre-approved buyer.
- A handwritten hardship letter (handwritten letters invoke human emotion) explaining why you are performing a short sale. Whether it’s a medical hardship, marital hardship, or a financial hardship, you must justify why you are either late on your payments or why you will not be able to make them in the future.
- A financial statement. You will need to itemize all of your outgoing expenses and compare it with your income.
- Each borrowers last 2 pay stubs showing proof of income.
- A copy of your mortgage statement with the loan number and balance due.
- A copy of the listing contract.
- Three months bank statements. Usually they will want the actual statement or an internet version with the bank’s letterhead on it to make it valid.
- Last 2 years tax returns with W-2’s and 1099’s. If you are self employed, the lender might ask for a P & L (profit and loss statement).
- An estimated closing statement (commonly referred to as a HUD 1) showing 0 proceeds to the borrower (prepared by an escrow company).
- A third party authorization form for your agent to receive and convey information back and forth with your lender.
All lenders aren’t the same and many might not require all of these items, however, why not go the extra mile and make your case as strong as possible? Below are optional but recommended items that you can include in your package.
- Comparative Market Analysis (CMA). You should substantiate to the bank that the value you want them to accept is in line with the current market conditions. The bank wants to know they are selling it for market value. Otherwise, they may choose to deny the short sale and take their chances in selling the property themselves. The point is that you should not just put a low price on the property and expect the bank to accept it.
- Statistics of foreclosures in the neighborhood.
- Proof of active listings in the area that are lower and not selling (proves your offer is a good offer).
- Copy of the MLS detailed printout of your property showing number of days on the market.
- A history of the number of showings on the property, along with agent feedback, as well as any previous offers on the property.
The most important part of the short sale package/application process is to turn in a complete package. Don’t send everything over in segments. It will get lost and thrown in their “circular file”. The people who work in the loss mitigation department “cherry pick” their files…they pick the files that are complete and choose the files that look like they have the best chance of getting approved.
Last but not least, having an agent who is on your side and knows what the banks are looking for will increase your odds of getting a short sale approved.
If you have any questions, or if we can help in any way feel free to call or email us. We’re here to help.
Mike Wochner
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