Creating a Successful Short Sale Package

I am often asked by other investors new to the short sale process… “What do I
include in my short sale package?”



I personally think that this is a great question and is a key starting point for
investors new to short sales --- where do I start? What do I need to include in
my short sale package?



Knowing
exactly what to include and having a system in place to ensure that you create a
successful package to submit every time will greatly improve your chances of a
successful short sale.

Basic Contents of a Short Sale Package
The
following is a basic outline of what you want to include in a successful short
sale package:

• Cover
  Letter
  
  


• Authorization
  to Release Information
  
  


• Sellers
  Hardship Letter
  
  


• Seller’s
  Financial information – most banks have a form for this however I use a
  standard form initially with all sellers (an example can be found here)
  
  


• Supporting
  Financial Information:
  
  




• 2
  years w2’s
  
  


• 2
  months pay stubs
  
  


• 2
  months bank statements
  
  




• Supporting
  Hardship info – for example HOA liens, medical statements, disability
  statements
  
  


• Repair
  Estimate for the property – if you can develop a relationship with a
  contractor for this it adds credibility
  
  


• Comps
  for the property
  
  


• Contract
  
  


• Net
  Sheet
  
  


• Additional
  information that may be asked for:
  
  




• The
  first mortgage holder may ask for a payoff amount from the 2nd
  
  


• The
  second mortgage holder may ask for a payoff amount from the 1st
  
  


• Initial
  Title Report – I have had one bank ask for this
  
  

Cover Letter



The cover letter should be clear and concise giving the needed
information to the bank. The information that I include is an overview of the
homeowner’s situation, what they owe on the property, what it is really worth
and mention the amount of the needed repairs.
I also state what my offer to the bank is. I conclude my cover letter with all of my contact information
and state that I hope we can work together to resolve this issue for the
homeowner.



Authorization to Release Information



I have a standard Authorization form that I use and in most cases this
works fine. There are a few banks
that require their own form for this. GMAC
will require that you use their form and it must be signed and notarized and the
original must be sent back in.




Seller’s Hardship Letter




I typically ask my sellers to make this at least a page long.
The goal if this letter is to simply have the homeowner explain their
situation to the bank. This will include key items such as job loss, medical issues,
divorce, health issues, etc. If the
seller is considering bankruptcy you can have them include that, however it
typically doesn’t scare the bank into acting faster.



Seller’s Financial Information



The bank really wants to know what is the inflow and outflow that the
seller has each month and what other expenses and assets do they have.
I have two standard forms that I have my seller’s fill out, personal
information and financial information.



In most cases these forms will work, however there are times that
the bank will request that the homeowner complete the standard forms that they
issue.



Supporting Financial Information



These items are typically the same required by a borrower when applying
for a loan:

• 2
  years w2’s
  
  


• 2
  months pay stubs


• 2
  months bank statements

I always tell my sellers that in order for the bank to evaluate
considering taking less than what is owed on their property they need provide
the same type of information they did when they applied for a loan, however they
are now showing they can’t do this financially at this time.



Supporting Hardship Info



In order to paint the full picture to the bank of the homeowner’s
situation it can help to provide additional documents showing the hardship.
This can include medical bills, accident reports, layoff notice, etc.



Repair Estimate For The Property



Providing the bank with a detailed repair estimate from a reputable
contractor will assist greatly in getting your short sale accepted.
The bank doesn’t want to own property and especially not property that
needs a complete overhaul. Showing
this by presenting what needs to be done and the cost is very helpful.



Comps For The Property



You definitely want to do your homework and provide the bank with at
least 3 to 5 comps of properties in the area that have sold in the last 12
months, preferably the last 6 months. In
doing this you want to try to get as close to the subject property that you can
and ensure that you provide the lowest comps that you can.
I have found that it is also helpful to be able to show the number of
days on market and any and all down payment assistance or seller concessions
given in the sale.



Contract



As an investor most of the time when working a short sale your goal is
to purchase that property in some form. This
could be a purchase for your personal portfolio, a fix-n-flip or even a double
closing. In order to do this you
will need a contract.



I have found that a generic contract 1-3 pages works great.
I always include my company name/ and/or assigns as the buyer and I also
always include the following clauses:

o
Buyer
Shall be entitled access to the property to show partners, lenders, inspectors,
contractors and other interested parties prior to closing

o
Buyer is
purchasing “AS IS”


o
Contingent
on the mortgage holder(s) accepting a short sale


o
Contingent
on a clean title search being performed for liens and/or other judgments against
property


Providing
a contract shows the bank that you are serious and want to purchase the
property.





Net
Sheet




Banks
want to see how much money they are going to net with your offer.
Providing a Net Sheet with your offer will provide the bank with the
numbers they need to see – what will we get.
I have found a great tool that I use for generating a preliminary net
sheet to submit with my offers – this tool is EasyHUD
it is a membership site that allows you to generate all of the net
sheets or hud1’s that you need.



Additional
Information



Typically
if a bank requires additional information they will let you know what it is.
The most common that I have seen so far is the request for the payoff
amounts from the other lien or mortgage holders on the property.



If
you are working with a homeowner with an FHA or a VA loan then you will have to
include additional forms with your short sale package.



FHA



The
application to participate for FHA can be found at http://www.hudclips.org/sub_nonhud/html/pdfforms/90036.pdf
and the Counseling Certification can be found here http://www.hudclips.org/sub_nonhud/html/pdfforms/90038.pdf





VA




If
the homeowner has a VA loan then they can apply for a Compromise Sale Package
– this package can be found at warehouse.html#CompSale">http://www.vba.va.gov/ro/roanoke/rlc/va-forms-warehouse.html#CompSale