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The banks inventory of foreclosed properties are still accumulating and costing the banks lots of money.  With a projection of a huge number of foreclosures yet to come, lenders are acting more quickly and favorable to short sales.

And a number of home owners are giving short sale a try.  Home owners are seeing short sale as a way to preserve their ability to purchase a home in the future.

To get the lender to agree to a short sale, you must have done your homework and have your paperwork and answers ready. More importantly, you should approach the lender with good reasons and solid facts as to why the lender should accept the short sale.

 Part II - The Short Sale Process

1.  Talk to the Right Person - "Loss Mitigation Department".  Each lender may have a different name for the persons handling short sales.  Make sure you are talking with the person that has the authority to make the decision.  You may need to make a number of calls before you get the person responsible for handling short sales.

2.  Commission Negotiation - It does not matter what commission the seller has agreed to pay.  The lender is the one who will be paying the commission, not the seller.  Because the lender is losing money, the lender is likely going to negotiate the commission amount paid.  Be prepared to discuss your fees.

3.  Documents to Submit to the Lender - There are a number of documents that must be prepared and submitted to the lender.  This information is used by the lender to determine the worthiness of granting a short sale.

• Hardship Letter:  Tell the lender what happen to put you in this situation.  Lenders are humans and can understand if you lost your job, had hospital emergencies, and  sudden family tragedy like a death.  The sadder, the better.  You want to make a plea that gets the lender to accept less then full payment.
   
• Authorization to Release:  This gives the lender permission to talk with other persons such as your real estate agent, title company, lawyer, etc., about your loan. The letter should include:  Property Address, Loan Reference Number, Your Name, the Date, Your Agent's Name and Contact Information
   
• Last 2 Paycheck Stubs:  Lenders want to know about your financial situation and the amount of income you have.
   
• Last 2 Monthly Bank Statements:  If you have had large cash withdrawals, or written an unusual number of checks, it is probably a good idea to explain each of those items to the lender.  Also be prepared to explain deposits in the event lender wants to know the source of the deposits and if they will continue.
   
• 2 Years W2 (most recent):  Lenders wants to know about your financial situation and the source of your income.
   
• Last 2 Years Tax Returns:  Lenders wants to know about your income, assets and debt obligations.
   
• Detailed List of Monthly Expenses & Income:  Lenders want to know about your income and expenses to determine if you really entitled to a discounted payment.
   
• Signed Listing Agreement:  When you have an agreement to sell with a potential purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.
   
• Most Recent Appraisal (if available):  You should include an appraisal, if you have it, that shows the property's value is much lower.
   
• Comparative Market Analysis (CMA):  If part of your reason is due to declining property value, use CMA to substantiate your case to the lender. Be sure to include listings that are active on the market, pending sales and sold properties from the past six months.  You can also use a recent appraisal.
   
• Recent Mortgage Statements:  This helps to verify your loan information, payments, and balance due.
   
• HUD Statement from Last Transaction (if available):  If you have a HUD loan, this helps to verify your loan information, payments, and balance due.

The key is to make sure you prove to the bank that the seller is a candidate for a discounted payoff of their mortgage. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is being forgiving.

Get your process and documents together and be diligent with calling and following-up with the lender.
 

next:  Getting the Short Sale Sold -Part I

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