How to Prepare a Short Sale Package

Learning how to prepare a short sale package can mean the difference between successfully settling your financial obligation and getting deeper into debt. Basically, the short sale process can be quite confusing and stressful if not implemented the right way.

This is because the usual premise is that the seller does not normally care how much the buyer knows until they know how much the buyer cares to pay for the property. With this, it is highly important to learn how to prepare a short sale package in order to influence the decision process of the buyer in a positive way. Lenders and Government programs like HAFA are trying to persuede the short sale by offering incentives including $3,000 Cash Back!

In order to know how to prepare a short sale package, you must have a clear understanding of what a short sale is. It is typically a process where the lender allows the borrower to sell the property in mortgage to be able to make payments to a debt that is due. Normally the amount gained from a short sale is less than the actual balance of the outstanding loan.

However, this is a risk that both the borrower and the lender must face since the original intent is to settle as much of the loan as possible. The importance of knowing how to prepare a short sale package must also take into consideration:

• Obtaining legal advice from a qualified real estate lawyer.
• Discussing with a qualified accountant the tax ramifications associated with a short sale.

Reasons Banks May Agree to a Short Sale

Before learning how to prepare a short sale package you must realize that before any selling can occur, the lender must agree to it. In most cases the lending facility is the bank where the loan was taken out. In this essence it is extremely vital to know that there are only two common reasons why banks agree to a short sale:

• The debt is more than the value of the property to be sold.
• Seller has fallen into a hardship.

In the context of knowing how to prepare a short sale package, hardship is defined as a condition that has caused the delinquent payments on a mortgage. According to the U.S. Department of Housing and Urban Development, the only acceptable hardships when it comes to defaulting on a loan and in the context of how to prepare a short sale package are:

• The principal borrower dies
• Death of a family member of the principal borrower
• Principal borrower becomes seriously ill
• A family member of the principal borrower has a serious illness
• Marriage problems like separation or divorce
• Loss of employment
• Decrease in income potential
• Abandonment of property
• Excessive obligations
• Transfer of employment location
• Active military service
• Inability to sell property
• Cannot adequately rent out property
• Losses caused by accident, fire, and natural causes
• Fraud

Details on How to Prepare a Short Sale Package

Learning about various acceptable hardship reasons is important in knowing how to prepare a short sale package since the initial step is to identify the correct type of hardship. Based on this hardship, the agent will prepare a package that will be submitted to the lending bank for the consideration of the short sale. This means that unless you know the types of hardship, learning how to prepare a short sale package will become close to impossible.

The short sale package that will be sent to the bank will include 8 common requirements. It is important in the context of knowing how to prepare a short sale package that these requirements are adequately prepared to secure bank approval. The common requirements involved in preparing a short sale package:

• Cover letter. Usually lenders are not keen on disclosing any personal information of the seller without any written authorization. The purpose of the cover letter is to give permission to the lending bank to initiate negotiations with interested parties on the particulars of your loan and the short sale. Some details that must be included are:

-Property address

-Reference number of the loan

-Name of borrower

-Date

-Name of agent and contact information if any

• Preliminary net sheet. This is a document representing the estimated closing statement showing the sale price that is expected from the property. It must also include the cost of sale, outstanding payments due, unpaid balances, late fees, and real estate commissions among others. Your lawyer or closing agent should prepare this for you to accurately calculate the fees. The intention is to show that the seller has no cash which necessitates the holding of a short sale.

• Hardship letter. In the context of how to prepare a short sale package, this is one of the most vital components. The sadder the letter, the better. It is important to remember though that a hardship letter is a statement of facts that describe how the current financial condition was reached. It is also a plea made to the lender to graciously accept payment that is less than the full amount of the debt. Make sure that dishonesty is avoided during the preparation of the letter.

• Financial statement. Knowing how to prepare a short sale package means you must be able to prepare a financial statement based on proof of income and assets. It is imperative that honesty and truthfulness are observed in the disclosure of assets as well as the statement of the financial situation.

Details about savings accounts, stocks, bonds, negotiable instruments, and other assets that have tangible value must be declared. This must convince the lending bank that there is ample reason for the forgiveness of the debt.

• Tax returns. Usually when learning how to prepare a short sale package, you would need to go back at least two years for the tax returns. The inclusion of two years of tax returns is necessary for the lending bank to establish that there has been a downward pattern or deterioration of your financial condition.

• Payroll stubs. Depending on the hardship, recent payroll stubs can help substantiate any claims of declined financial capacity. Keep in mind that knowing how to prepare a short sale package means learning how to convince the lending bank that you have a legitimate claim.

• Comparative Market Analysis. In the context of how to prepare a short sale package, the Comparative Market Analysis or CMA can be used to substantiate the marketplace. There are instances wherein the market declines and property values can fall. If the hardship is based on this, then it can help the lending bank in making a decision to approve the short sale.

• Bank statements. Copies of your bank statements for the last two months are normally required. In terms of preparing a short sale package, this establishes any decline in your savings which has caused a depletion of your account. It is also important to explain any large withdrawals or unaccountable deposits that are reflected.

Taking into consideration all of these will help you to learn how to prepare a short sale package. It is important to realize that unless a bank approval is secured, the short sale will never push through.

If you have any additional questions or you want to see if you qualify, contact us your short sale specialist today! 1-877-737-4903

1-877-737-4903

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