Banks all require that you provide them with a certain set of documents in a Short Sale package. The following are the documents that most banks all require before they entertain a Short Sale

1.) A hardship letter from the homeowner outlining what is causing missed payments and what the homeowner has done to try to change the situation.

Begin the hardship letter with a short description of the property, the loan number, as well as an apology for the situation.

Then the homeowner should tell in their own words exactly what caused the missed payments. Extensive medical bills? Job loss? Did the homeowner retire, cutting income substantially? Has an adjustable rate loan readjusted? Is the home underwater on its mortgage? Has the homeowner been transferred to another part of the country and the home is not selling? All of these are valid hardships that can be explained in a letter to the Lender’s Loss Mitigation Department.

Also include a description of any efforts the homeowner has made to resolve the problem. Has a new job been found? Have they eliminated all discretionary spending?

2.) Every member of the household who is contributing to the household income should include their last two pay stubs. This is including, but not limited to, commissions from the last few months, child support payments, alimony checks, and annuity payments.

3.) If the homeowner has a business, the Lender will want to see profit and loss statements and a current balance sheet.

4.) In order to get an idea of the homeowner’s spending habits, the bank will want to see your last two months’ bank statements. If the homeowner has a lot of credit card debt, they might be able to get a debt counselor to work with the Lenders to restructure the debt to have lower interest rates and monthly payments or forgive some of the debt altogether.

5.) The last two years’ tax returns. They give an accurate picture of financial stability and ability to pay. It also gives the Lender an idea of other resources that might be tapped if the Lender goes through with foreclosure and files a deficiency judgment against the homeowner.

6.) The bank also wants to see a realistic budget for the homeowner. If the homeowner’s budget is $300 above or below balanced on average, they might be able to restructure their finances if they prefer to save the house.

7.) A listing agreement with a price. The real estate agent should include their normal commission and closing costs on the listing agreement. Lenders who approve Short Sales also pay for the commissions and most other closing costs.

8.) An offer. Your offer, as well as the power of attorney gives you the power to negotiate the Short Sale and list the property. You cannot do these deals without having both of these documents.

9.) Power of Attorney. You must have an authorization form giving you or your negotiator permission to talk to the Lender. This is actually the first document that you should obtain from the homeowner so that you can obtain any special instructions from the Lender before the Short Sale package is submitted.

After you have all of this information, you are well on the way to getting your short sale deal done!

Want to find out more about short sale investing? Then visit Bob Massey’s site and learn how to do a short sale for the maximum profit in today’s market.

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