The Basics of a Short Sale
The Basics of a Short Sale
Banks grant short sales for 2 reasons: the seller has a hardship, and the seller owes more on the mortgage than the home is worth.
A few examples of a hardship are:
- Unemployment / reduced income
- Divorce
- Medical emergency
- Job transfer out of town
- Bankruptcy
- Death
The seller will need to prepare a financial package for submission to the short sale bank. Each bank has its own guidelines but the basic procedure is similar from bank to bank. The seller's short sale package will consist of:
- Letter of authorization, which lets agent speak to the bank.
- HUD-1 or preliminary net sheet
- Completed financial statement
- Seller's hardship letter
- 2 years of tax returns
- 2 years of W-2s
- Recent payroll stubs
- Last 2 months of bank statements
- Comparative market analysis or list of recent comparable sales
Writing the Short Sale Offer and Submitting to the Bank
After the seller accepts the offer, the listing agent will send the following items to the bank:
- Listing agreement
- Executed purchase offer
- Buyer's preapproval letter and copy of earnest money check
- Seller's short sale package
Following is a typical short sale process at the bank:
- Bank acknowledges receipt of the file. This can take 10 days to a month.
- A negotiator is assigned. This can take 30 to 60 days.
- A BPO is ordered. The bank probably will refuse to share the results of the BPO.
- A second negotiator may be assigned. This can take another 30 days.
- The file is sent for review, this can take 2 weeks to 30 days.
- The bank may then request that all parties sign an Arm's-Length Affidavit.
- The bank issues a short sale approval letter.
