How to Do a Short Sale

This article will guide you step by step on how to complete a short sale with your lender(s). It really is not all that complicated, you just need to be very persistent with your lender. What is a short sale? A short sale is when the sale of your property will not cover the entire mortgage(s). AKA "being upside down" in the home. This article will outline what the steps will be in doing a short sale, and the documentation required to complete one.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Patience!

1. Contact your lender! I'm amazed at how many times I hear from a client and it's just too late. They have buried their heads in the sand and ignored the calls from the collection department. Please do yourself a favor and at the first sign of struggle contact your lender! Ask for the Loss Mitigation or Loan Workout department and tell them about your situation.

2. Next you need to contact a real estate agent who specializes in short sales. This agent will guide you through the remaining steps. Make sure you are hiring an agent experienced in short sales.

3. Put the home up for sale and begin gathering financial documents. Each lender has different requirements, but in general you will be asked for:
   
   * 2 years past tax returns
   * 2 months bank statements (including brokerage accounts – you do NOT need to include retirement accounts)
   * 2 most recent pay stubs
   * Current HOA statement (if applicable)
   * Hardship letter documenting the reason payments can no longer be made.
   * 2 Most recent mortgage statements (from all lenders)
   * Financial Statement - view an example at: http://www.SacramentoStopForeclosure.com/forms/freddiemac1126.pdf
   
   Make sure to include anything else your lender asks you for. These documents along with an offer from a buyer will complete your "package". It is crucial that you submit a completed package to your lender at one time. If they have to chase down a document here, or a statement there, your file will get set aside. Your agent will help you with this.

4. After your agent has submitted a complete package to the lender, they will be calling them 2-3 times a day, at least 3 days per week. If not, then maybe you need to start looking for a new agent. Before you hire a short sale agent, ask them if they have a team in place to make these calls. Busy agents do not have time to sit on hold for hours to hear from a lender regarding the status of your file. The successful short sale agents have assistants or hire outside negotiation teams to handle this step. Make sure your agent does too.

5. Approval. Once you have heard this from your lender, you typically have 2-3 weeks to close escrow. Your agent should then be changing the status of your home to "Pending" on your local MLS (Multiple Listing Service). You will now proceed to your normal escrow closing procedures outlined in your purchase agreement with the buyer: inspections, disclosures, etc.

6. Closing. You arrive at the title company and sign paperwork to close the deal. After receiving paperwork from title, your lender releases the lien on the property subject to your written agreement with them. Your agent will also be the first point of contact regarding this document, and you should strongly consider the advice of a real estate attorney with regards to a short sale.

Tips & Warnings

• Hire an experienced short sale agent.
• Have lots of patience.
• Gather financial paperwork and keep in one file folder.
• Take lots of notes regarding conversations, time lines, etc.
• There are a lot of scams to avoid foreclosure - check to make sure you're working with a licensed professional!

Resources

• Sacramento Foreclosure Help

[kaytay]

on 3/23/2009 thanks for explaining a "short sale"