Steps on How To Do A Short Sale
If you want to know how to do a short sale successfully, there are a few key pieces to really building a strong short sale case.
After you have found a homeowner who is delinquent with a notice of default willing to work with you, the first thing you need to do is have them sign some paperwork. The first thing they will need to sign is the authorization of release form.
This form gives you permission to talk to the lender about the their loans. You absolutely need this authorization form in order to do a short sale. You will need the loan numbers from the last statement that was sent to them by the lender(s). If you cannot get the loan numbers, get their social security numbers. You will need both. Sometimes, people do not like giving out their social security numbers. Let them know you only need it so you can talk to their lender about their loans. Be sure to get it signed by both owners if it applies.
If the property has two or more loans on it, you’ll need a separate authorization form for each lender.
Next on how to do a short sale is calling the bank. When you call up the homeowner’s lender, make sure it’s the corporate office. There are many smaller branches spread out across the nation and if you talk to a branch, they will most likely send you to the corporate office anyway. Once you call the corporate office you will want to ask for the Loss Mitigation Department or Work Out Department. This is the department that handles all the loans that are delinquent. Now keep in mind, if the homeowner is not at least a few months behind on payments, the loan may not be in this department yet, so it will be harder to convince the lender to accept a short sale this early in the game.
When you call the bank you need to talk to the person that specifically handles the homeowners account and get their direct number and email so you can get in touch with them without the runaround. Tell them you are the buyer and have an authorization form, which you need to fax to them.
Before you do anything else, you need to fax this authorization form to their department or else you will be wasting your time. They will not tell you a thing until they have that release form in their possession. It usually takes about 48 hours for the authorization to come through.
After 48 hours has gone by, call the LM department again and tell them that you would like to get a short sale or workout packet to help the homeowners avoid bankruptcy and foreclosure. A lot of times you can just go to their website an print it off.
Short Payoff Package Required Documents
You will receive a letter that looks similar to this that explains everything the lender wants in order to consider the short sale request. This biggest thing that prevents short sales from happening quickly is failure to provide what the lender requests.
The following is a list of documents needed to review your request for a Short Payoff. Please be advised: THE FOLLOWING DOCUMENTS ARE REQUIRED. IF YOU DO NOT HAVE ACCESS TO A DOCUMENT, PLEASE STATE IN YOUR HARDSHIP LETTER WHAT YOU DON’T HAVE AND WHY. Failure to provide the following information may hinder, prolong, or cancel your request.
1) HARDSHIP LETTER: A letter describing your financial hardship, and what happened to cause you to be in your situation.
2) 2 MONTHS BANK STATEMENTS: Your most recent 2 months of bank statements.
3) 2 MONTHS INCOME STATEMENTS: Your most recent 2 months of pay stubs or, if you are self employed, your last 2 quarters’ Profit and Loss statements.
4) 2 YEARS’ TAX RETURNS: Your last 2 years tax returns, including your W-2’s.
5) SUPPORTING DOCUMENTS: Any documents you may have to support what you stated in your Hardship Letter and the value of the property. Examples: pictures of property damage, appraisal indicating low property value, medical bills, divorce decree, etc.
1) PURCHASE AGREEMENT: A copy of the Purchase Agreement, signed by both the buyer and the seller that indicates the offer amount.
2) CLOSING COSTS: A copy of the estimated costs for sale of the property. This can be in the form of a HUD-1, net sheet, or estimated closing statement.
Any missing documents requested above, may result in the possible denial or delay in your request. Due to month-end volume, packages received after the third Wednesday of the month may take additional time to process and may not be completed by month-end. Incomplete packages will be denied after 21 days if the missing articles have not been provided.
And important piece to the short sale is the supporting documents. You are trying to convince the lender why the home is only worth so much and why they should accept your offer.
Once you have all the documents the lender requires, send the packet back to them. They will request a BPO which will determine what the property is worth and how close your offer is to that value. If your offer is approved you will receive an acceptance letter giving you details of everything needed to close. So you’ll need to have your funding in place.
This is how to do a short sale. It takes a lot of patience and follow up. Lenders can often be very slow so you have to be proactive. But you can pick up some great deals this way.