The first step in the beginning the short sale process is for you to determine and document your reasons for falling behind in your mortgage payments. Most often the hardship is due to the loss of a job, medical expenses, divorce or the sharp increase in the interest rate. Once it has been determined that you have a legitimate hardship then there are two steps that can be taken simultaneously; the first is to call the lender and the second is to call a realtor.
Calling your lender takes time and patience but is necessary to begin the short sale process. Because short sales are so prevalent, banks have entire departments dedicated to handling incoming calls from homeowners on this issue. Once you have a bank representative on the phone, express your desire to begin the short sale process. There are so many programs that you may qualify for and I will begin to discuss each one in subsequent posts; so just know that you have options as you begin this process.
At the same time that you are calling your lender, you will need to find a realtor that has experience with short sales. Your home must be listed with a realtor in order for the bank to process your short sale request. Because short sales are a specialty area, you need to find a realtor that is experienced with the process. There is a widely recognized certification for realtors – the Certified Distressed Property Expert or CDPE – whcih means that the realtor went through intense training to understand the short sale process. Often times, realtors will team up with attorneys and allow the lawyers to process the short sale once a contract is received. In either case, ask the realtor what process they use and what are the results. You have to be very comfortable with this realtor because as you will see, they will have access to personal family documents.
At your initial meeting with the realtor, they will assemble the ‘short sale’ package. Included in this package are the following documents:
- Hardship Letter & Supporting Documentation
- Two Years Tax Returns
- Two Months Bank Statements
- Two Months Pay Stubs
- Listing Agreement
- Homeowner’s Association Contact Information
- Last Monthly Mortgage Statement
Be prepared to sign off on the following documents at the initial meeting:
- Authorization letter – authorizing the realtor (and attorney) to discuss your account
- Financial Worksheet detailing your monthly income and expenses
- IRS form 4506T- EZ authorizing the bank to pull your tax returns on file with the IRS
- Short Sale disclosure form – detailing the issues surrounding the short sale
This can be an overwhelming process. It may seem like a lot of forms to sign and documents to bring but the lender wants to be able to evaluate your total financial picture when determining the strength of your short sale request. Also, remember the lender can refer back to your initial financial documents presented when you originally applied for the home loan as well as any refinance documents submitted at the time. Make sure you present a consistent financial picture.
The key to starting your short sale process on the right foot is twofold. First, notify your lender right away if you are falling behind or anticipate falling behind on your mortgage. Sometimes the lender will notify you if a previous program did not work and they will initiate a short sale. But don’t assume that no news is good news – they can foreclose quickly in the state of Georgia. Second, get your documents ready for your first meeting with the realtor. Different lenders want information in various stages so you want your realtor to be prepared to hit the ground running from the first day of the listing. Don’t make them have to call and wait for you.
There are several types of short sales and I will begin to cover each one in subsequent posts. Bookmark this blog and tell others.