1. Call the Lender First
Often times, especially in the current economy, speaking to your bank will open many options for you. Tell them what your hardship situation is, and what they recommend for you to do. The bank may offer to reduce your payments or figure out a loan modification.
2. Call Mike At RE/MAX Champions
If the bank’s offer does not appeal to you and you decide on doing a short sale, then it is necessary to find a knowledgeable realtor who has flourishing experience in the short sale field. Ask lots of questions. Make sure they have many successful short sales under their belt so that they have the skills to negotiate with the bank for you. You only get one chance to do a short sale, and you need to find the right agent to do it for you.
3. The Lender Will Want from You
Your real estate agent will prepare a short sale package to submit to the bank for review. In the package, the bank will request your financial information to see if you are eligible for short sale approval. The faster your real estate agent gets your information, the better. Normally, it is best to give your realtor the following within the week of request:
A. Hardship Letter. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a horrible accident caused death in the family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.
B. Authorization Letter - Lenders typically do not want to disclose any of your personal information without written authorization to do so. Without this authorization, your realtor will not be able to do anything for you. As soon as you decide on doing a short sale, the authorization letter must be filled out immediately. The realtor will provide you with the papers.
C. 2 Month’s Pay stubs and any other Proof of Income and Assets
D. 2 Months’ Bank Statements
E. If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.
F. Last 2 Year’s W-2
G. Up to 2 Year’s Tax Return (Depending on the Bank)
4. What Your Real Estate Agent Needs to Do
Put your Property on the Market and Quickly Receive Multiple Offers
Prepare the Following:
• Purchase Agreement & Listing Agreement
When you reach an agreement to sell with a prospective purchaser, the lender will want a fully executed purchase contract, along with a fully executed Purchase Contract. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home protection plans or termite inspections.
• Preliminary Net Sheet (Estimated HUD-1)
This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. If the bottom line shows cash to the seller, you will probably not need a short sale.
• Comparative Market Analysis (CMA)
Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA).
• Compile everything neatly and send COMPLETED package to the Lenders (both senior loans and junior loans)
• Constantly keeping in contact with all lenders to ensure up-to-the-minute updates of your property.
5. Bank Will Contact the Real Estate Agent to:
-Schedule a BPO (Broker Price Opinion) or Appraisal with the Property The bank will hire an outside appraiser to investigate your home to see how much your home is worth. From that, they will evaluate what their approval price of the property will be.
-Ask for any supplement information
-Contact Real Estate Agent with a specific Negotiator to sort out Short Sale details.
What is the Foreclosure Timeline?
• Preforeclosure begins the day that you are late with your mortgage payment and late charges begin accruing.
• Lender sends notice of default (around 45 days)
• Notice of Intent to Foreclose Publicized (around 90 days)
• Auction (around 150+ days)/Real Estate Owned
• Redemption Period: from the time the property sold at auction until the clerk files the paperwork.