Stop Foreclosure
What Makes an Effective Short Sale Package?
In the last article, The Anatomy of a Short Sale, we examined what potential requirements would be required to qualify for a short sale. Now we are going to examine what items are needed in order to assemble an effective short sale package for the lender. The short sale package, when completed with all the required documentation, can have a very positive effect on the result of the transaction. If there are multiple loans on the distressed property this package must be duplicated so that each lender has a complete package. How the short sale package is submitted to the lender is at the direction of the lender. The lender(s) may want it faxed, emailed or delivered in hard copy via the mail. Let’s look at the items that should be included in the package:
• The Cover Letter – Also known as the Short Sale Proposal Letter. This letter should be one page that is clear and concise providing the lender with an accurate overview of the distressed owner’s situation, what they owe on the property, what the property is worth, what repairs are needed on the property and complete details of the negotiated purchase offer.
• Short Sale Payoff Application (If Applicable) – This application, if applicable, will be provided by the lender, should be completed by the seller and should be included in the short sale package.
• Seller’s Hardship Letter – The hardship letter allows the seller to explain their situation to the lender. The sellers should communicate that they are sorry, their circumstances and that they have exhausted all their options and the next step is letting the property go to foreclosure.
• Seller’s Financial Information – The owner’s financial information can easily be compiled by listing Assets (Real Estate, Stocks, Bonds, Mutual Funds, Bank Accounts, Personal Property and Retirement Accounts), Liabilities (Real Estate Loans, Personal Loans, Credit Card Debt, IRS Liens, Judgments and Lawsuits) and Monthly Expenses ( Credit Card Bills, Utility Bills, Car Payments, Insurance Payments, Food and Clothing, Medical Bill and Prescriptions, Child Support and Tuition Expenses)
• Supporting Financial Information – These documents are typically the same as the ones that were provided when the seller applied for the mortgage(Pay Stubs, w-2’s or Tax Returns and Bank Statements or Credit Reports) The lender will advise as to how far back they want you to go with the documentation.
• Supporting Hardship Information – A complete picture of the distressed homeowner’s situation can also be supported by also providing the lender with additional documentation (HOA Liens, Medical Bills, Disability Statement, Unemployment Benefits or Status or Divorce Decree).
• Repair Estimate – If repairs on the property are needed, a detailed estimate of cost by a licensed contractor should be included with the short sale package.
• Market Analysis – The REALTOR should prepare a BPO, Brokers Pricing Opinion, to be included in the package. This BPO will highlight data such as Average Days on the Market, Number of Short Sales and Foreclosures in the area, Pricing Trends, Recent Economic Data and the Absorption Rate. The lender will also order one or two BPO’s after they receive the short sale package.
• Marketing History – The lender want to see that everything possible has been done to obtain the best price for the property. They want to see a complete list of showings, feedback and advertising.
• Purchase Contract – The Purchase and Sale Agreement will be totally negotiated, executed (signed by all parties) and submitted with all supporting documents to the lender. The supporting documents would be the buyer’s preapproval letter, a copy of their earnest money deposit and a Preliminary HUD-1 prepared by an attorney.
Follow-Up is Needed
After the short sale package has been submitted several things must be verified with the lender. This follow up is vital to the success of the short sale. We must make certain that the package was received and there is nothing more needed in order to approve the sale. We must also verify that the Loss Mitigation Department has or will communicate with the Foreclosure Department to try to ensure that foreclosure proceedings have been halted. During this process we will establish how the Loss Mitigation wants to be contacted; phone, fax or email.
Incomplete Package = Failure
One of the most common reasons why short sales fail to reach a successful closing is because an incomplete short sale package was submitted to the lender. It is important to remember that in today’s market the loss mitigation departments of the lenders are completely covered up distressed property transactions. The negotiators simple do not have time to hold someone’s hand and guide them through the process or let them know what documentation they are missing. They devote their time to working on short sale transactions where they have complete packages and documentation. The incomplete packages simply get put in a pile that will be handled when they have the time, which they never will. Just by the nature of the beast, short sale transactions can take a long time….Without a complete short sale package they will take forever.
Should We Talk?
If you reside in the Greater Atlanta Area, are in a distressed housing situation and would like a confidential meeting to discuss your options feel free to contact me. You may use the contact form on this page or you can call me at 770-318-2572.