What is a short sale?
Short sales are becoming a popular way to get out from under the debt of a mortgage without completely ruining your credit. The bank holding your mortgage agrees to receive a payoff amount that is less than what you owe on your mortgage allowing the bank to retrieve some of its investment. It is beneficial to the seller because it prevents them from going into foreclosure and completely ruining their credit. And, the REALTOR and lawyer are able to get paid for their services.
If you know that you owe more than your house is worth (or you even suspect that you will not receive a high enough sale price to cover your expenses), and will not be able to pay your REALTOR, attorney and other closing costs, a short sale should be investigated with your attorney before listing your home with a REALTOR.
Not all short sales are approved. The following is the list of items the bank requires in order to seek short sale approval.
Some of the steps below should be done ahead of time like collecting data regarding pay stubs, tax returns and talking with a lawyer. Other steps happen once a signed contract is received for the property. The bank wants to see that the buyers are credible and the price is competitive with other sales in the area.
A checklist for short sale foreclosure:
- Cover letter on law office letterhead
- Copy of summons and complaint
- Copy of default letter with arrears and legal fees
- 2 most recent pay stubs
- Hardship letter that is handwritten
- 2 most recent bank statements
- Most recent tax return
- Worksheet with gross monthly expenses
- Listing agreement
- Contract of sale
- Copy of proposed settlement statement/ closing statement (HUD-1)
- Appraisal of property
- Signed Retainer agreement
- Signed authorization
- Repair estimates with photos
- Proof of funds/ pre-qualification letter
For more information on Short Sales, visit the National Association of Realtors website
If you have any further questions or comments, please post a comment below and we will answer in a timely fashion,