What is a Short Sale?

A short sale is a workout program that allows a borrower to sell the property, even if the proceeds are less than the loan payoff, due to low property value. Upon final approval, a short sale can help homeowners avoid further collection activity or foreclosure action, which can result in adverse credit reporting and possible tax liabilities.

What documents are required to begin a Short Sale application?

From the Realtor:

Fully executed listing agreement
Net sheet/HUD (our payoff is not necessary)
Fully executed purchase contract with all pages initialed by buyer(s) and seller(s)
Buyer prequalification letter (proof of funds if it's a cash offer)

From the Homeowner

Signed and dated financial worksheet listing all monthly expenses
Signed and dated hardship letter (why they are unable to pay the mortgage.)
Letter authorizing the realtor access to information on the account. It must be dated and include the last 4 digits of the borrower's Social Security Number, their signature, the full account number and the property address

Additional Information

Short Sale approval is good only for a limited time. If the closing does not occur within this time, the entire short sale package may need to be resubmitted with updated information, or the approval process may need to start over.
Realtor or homeowner inquiries should be directed to the negotiator assigned to the file. The negotiator's information will be given to you at the time of the introduction call to your mortgage holder.
Realtors are usually allowed 5% to 6% commission depending on the Investor rules. However, if it's a dual agency transaction the maximum commission is 5%, but some investors operate on a reduced commission structure. The actual commission schedule can be confirmed during the introduction call.
This must be an "arms-length" transaction, meaning, the property may not be sold to anyone with a close personal or business relationship with the seller. This includes family, friends, and/ or neighbors.
During the introduction call the following will be addressed:
- Commissions
- Fees and Costs
- Pricing of the property
- Timeline
In order to reduce the 37 business day response time the liquidation team is strongly recommending that the homeowner and/or realtor notify us of the intention to sell their property as soon as the listing contract is signed. This will allow us to complete the property valuation and borrower financial evaluation prior to receiving an offer significantly reducing the short sale decision time on a submitted offer.
In some cases investors and/or PMI companies require the mortgagors to sign an unsecured note for some or all of the difference between the property sale amount and the total amount due. This is communicated as part of the response on a short sale offer.