How to Get a Bank to Approve a Short Sale

Unemployment rates have continued to increase over time and with them the number of people that cannot afford to stay in their homes. Short sales are a viable alternative to foreclosure in the sense that a short sale will allow a homeowner to sell his home and settle with the bank for less than his loan balance. However, a short sale requires certain actions from the seller and comes with multiple stipulations as well.

Things You'll Need

• Realtor
• Short sale packet
• Budget letter
• Hardship letter
• Bank statements
• W-2s
• Pay stubs

Instructions

Contacting the Bank

1. Contact your mortgage company. Ask to speak with a representative in the loss mitigation department. Once you have explained your financial situation, she will transfer you to someone in the short sale department to speak with further.

2. Ask the loss mitigation representative what is required as part of the short sale packet. Standard items include paycheck stubs, severance letter, W-2s, bank statements, a budget letter and a hardship letter. Depending on your circumstances and your lender's requirements, additional documentation might also be required.

3. Prepare your supporting financial documentation while waiting for the bank to send its short sale package to you. Gather the information that the bank asked for and begin to draft your hardship letter.

4. Compose your hardship letter in a very straightforward and concise format. Your hardship letter should inform your lender about the circumstances leading up to your arrears and your inability to repay in a timely manner or continue paying your mortgage each month. Keep this letter short and sweet.

5. Begin selecting your Realtor. The bank requires that a professional real estate agent be involved in all short sale transactions. Contact at least three Realtors in regards to doing a short sale of your property and interview each of them. Make your selection based on expertise in short sale transactions.

Begin the Short Sale

1. Ask your Realtor what other documentation needs to be added or amended to your short sale package. Your Realtor will include authorization to negotiate on your behalf, photos of your property, a listing agreement as well as an offer to purchase the property (normally from an investor) to buy more time for you to stay in the home.

2. Get the short sale approval from the bank. Once the bank receives the entire packet, it will issue an approval to short sell the property and an allotted time frame in which to do so. It is important to remember that a short sale does not prevent foreclosure indefinitely; it simply buys time before the bank forecloses on a home. Your Realtor will receive the approval 30 to 60 days after she has submitted the short sale packet.

3. Prepare your home for sale. Keep it clean and clutter free during showings. Remember you are at the mercy of the bank and of the buyer in this scenario, and in order to sell your home quickly you must cooperate fully. If you can, begin moving out of the property at this point to leave it vacant for showings for faster sale.

4. Obtain an acceptable offer on the property. Your Realtor will present all of the offers on the property to the bank for its approval. Once the bank has approved an offer, a closing date will be set for the buyer to obtain title to the property. Continue to cooperate to sign your title over to the bank, which will then convey it to the new owner.

5. Close on the home. Once the new buyer has closed on the property, you have successfully received a short sale approval and settlement from the bank. If your home does not sell within the allotted time, the bank will still foreclose and your property will then be sold on the courthouse steps.

Tips & Warnings

• Short sales will not hurt your credit like a foreclosure will.

• Short sales do not prevent foreclosure, it simply prolongs the process. If your home doesn't sell, it will still be foreclosed.