A short sale package is a collection of documents that a borrower submits to their lender in order to request approval for a short sale. The purpose of the package is to provide the lender with information about the borrower’s financial situation and the reasons why they are unable to make their mortgage payments.
Key Facts
- Financial Statements: The borrower is required to provide detailed financial statements, including income, expenses, assets, and liabilities.
- Hardship Letter: This letter explains the seller’s financial hardship and the reasons why a short sale is the best option. It should include the loan number and be signed and dated.
- Tax Returns and Wage Documentation: The borrower needs to submit their federal tax returns for the past two years, including all schedules and pages. Additionally, they may need to provide W-2s or 1099s, pay stubs, and other documents supporting their wages.
- Bank Statements: The borrower must provide their most recent bank statements for all accounts, including every page. Large deposits or withdrawals may require additional explanations.
- Executed Listing Agreement: This document shows when the property was listed, the brokerage involved, the listing term, and the commission amount.
- Fully Executed Purchase Contract: The short sale package should include a fully executed purchase contract, signed by all parties involved. It’s important to ensure that the contract contains the property address, all necessary initials, and dates.
- Authorization Letter: This letter authorizes the bank to communicate with the listing agent regarding the short sale. It should be signed by the sellers.
- Closing Disclosure: The Closing Disclosure, formerly known as the HUD-1, is an estimated closing statement that includes the property address, sellers’ and buyers’ names, and the estimated closing date. It itemizes all costs of sale.
Additional documents that may be included in a short sale package, depending on the circumstances, are:
- Comparable Market Analysis (CMA): If there is a concern about the sales price being rejected or countered by the bank, a CMA can be included to justify the sales price.
- Repair Estimates: If the property requires repairs, including three repair estimates for each job needed can be helpful. The bank may choose the lowest estimate.
The following documents are typically included in a short sale package:
- Financial StatementsThe borrower is required to provide detailed financial statements, including income, expenses, assets, and liabilities.
- Hardship LetterThis letter explains the seller’s financial hardship and the reasons why a short sale is the best option. It should include the loan number and be signed and dated.
- Tax Returns and Wage DocumentationThe borrower needs to submit their federal tax returns for the past two years, including all schedules and pages. Additionally, they may need to provide W-2s or 1099s, pay stubs, and other documents supporting their wages.
- Bank StatementsThe borrower must provide their most recent bank statements for all accounts, including every page. Large deposits or withdrawals may require additional explanations.
- Executed Listing AgreementThis document shows when the property was listed, the brokerage involved, the listing term, and the commission amount.
- Fully Executed Purchase ContractThe short sale package should include a fully executed purchase contract, signed by all parties involved. It’s important to ensure that the contract contains the property address, all necessary initials, and dates.
- Authorization LetterThis letter authorizes the bank to communicate with the listing agent regarding the short sale. It should be signed by the sellers.
- Closing DisclosureThe Closing Disclosure, formerly known as the HUD-1, is an estimated closing statement that includes the property address, sellers’ and buyers’ names, and the estimated closing date. It itemizes all costs of sale.
Additional documents that may be included in a short sale package, depending on the circumstances, are:
- Comparable Market Analysis (CMA)If there is a concern about the sales price being rejected or countered by the bank, a CMA can be included to justify the sales price.
- Repair EstimatesIf the property requires repairs, including three repair estimates for each job needed can be helpful. The bank may choose the lowest estimate.
Sources
- Investopedia: What Is a Short Sale on a House? Process, Alternatives, and Mistakes to Avoid
- The Balance: How to Submit a Short Sale Package to the Bank
- NAR: The Short Sale Workflow
FAQs
What is a short sale package?
A short sale package is a collection of documents that a borrower submits to their lender in order to request approval for a short sale.
What documents are typically included in a short sale package?
Financial statements, hardship letter, tax returns and wage documentation, bank statements, executed listing agreement, fully executed purchase contract, authorization letter, and closing disclosure.
Why do I need to submit a short sale package?
To provide the lender with information about your financial situation and the reasons why you are unable to make your mortgage payments.
What happens after I submit a short sale package?
The lender will review your package and make a decision on whether or not to approve your request. If approved, the lender will work with you to sell the property and pay off the mortgage.
What are the benefits of a short sale?
A short sale can help you avoid foreclosure, damage to your credit score, and deficiency judgments.
What are the risks of a short sale?
A short sale can take a long time to complete, and there is no guarantee that the lender will approve your request. Additionally, you may be required to pay closing costs and other fees.
How can I increase my chances of getting my short sale approved?
By providing the lender with a complete and accurate short sale package, being honest about your financial situation, and working with a qualified real estate agent.
What should I do if my short sale is denied?
If your short sale is denied, you should contact a housing counselor or attorney to discuss your options.