Seller Documentation for a Short Sale

Paperwork. When most of us hear that word it sends shivers up our spine. I would imagine it’s a fear right up there with public speaking, heights, and snakes. Well, let me take some of the worry away to show you how easy some of the paperwork can be for a Mesa short sale.

As a home seller, there is really only one piece of paperwork for you to fill out; the Borrower’s Financial Worksheet, which I’ve described in detail in a previous post. The rest of the paperwork are things you’ll need to collect from your files.

Here’s a break down of the paperwork you will need to collect for a short sale. I’ve broken the lists into two different categories: Paperwork that all lenders require and the paperwork that some lenders require. Each lender has their own qualifying criteria for a short sale so they will want varying supporting documentation.

Short sale documents for all lenders:

• Two most recent Federal Tax forms. Expect to have to provide all pages, including schedules, although some lenders only require the first two pages.
• Two most recent bank statements. Be sure to include all accounts; checking, savings, money markets, etc.
• Two most recent pay statements. Income verification is an important part of the process. Some lenders will want pay statements that cover an entire month, so if you are bi-weekly, you may need to provide a third statement.
• Borrower’s Financial Worksheet. Some lenders provide their own worksheet, others will accept whatever form you wish to provide. Check out our previous post for specifics.
• Hardship letter. To me, the hardship letter sets the stage for your entire short sale. It explains why you are no longer able to make payments. While apologizing for the situation, describe the events leading up to the need for a short sale along with any actions you’ve already taken to correct it.

Miscellaneous documents for a short sale:

• Most recent two years’ IRS W-2 forms. I know, you’ve already provided the tax forms, but some lenders want these, too.
• Asset documentation. Your level of assets play a part in the investor’s decision whether to approve a short sale. This includes your stocks, bonds, mutual funds, and real estate holdings. Some lenders also request retirement account-related documentation (401k, IRA, etc).
• Lease agreements. If you own rental property, you may need to provide a copy of any leases.
• Two most recent years of corporate or partnership tax returns. If you own a business, this one applies to you.
• Unemployment documentation. If you’ve been terminated from a position, the lender will need to see some evidence. Benefit award letters and notice of layoff, termination or furlough are just a couple of examples.
• Divorce or separation agreements.
• Child support orders
• Homeowner’s insurance declaration page
• Utility bills. The investors use this as a one means to verify occupancy.

A short sale is nothing more than a case to petition an investor to forgive a debt. In order to do so, the investor will want to see the evidence to support your case. As long as you have or can obtain the required documentation, you’ll find the sale will actually go rather smoothly.

Have you heard of other documentation that lenders are requiring? Let me know.

Casteel Real Estate Professionals | 1255 N Estrada Circle, Mesa, Arizona 85207 | 480-694-0662