A short sale package is an offer to purchase a home in danger of foreclosure for less than the payoff amount. It includes fixed elements and supporting documents, and can help mitigate losses for the lender, homeowner, and community. The package includes a hardship letter, bank statements, pay stubs, tax returns, and other documents. Additional documents can support a lower value for the home and argue against foreclosure. The real estate agent provides the listing agreement and settlement documents. An orderly presentation can facilitate a positive response from the lender.
A short sale package refers to an offer made to a lender that includes an offer to purchase a home that is in danger of foreclosure. The term comes from the fact that the offer is less than the payoff amount and is a shortfall for the lender. In a short sale, a proposal package contains several fixed elements and a variety of supporting documents.
Short sales are an alternative way to foreclosure, a forced return of a property to the creditor for non-payment. Foreclosures are serious problems for the homeowner, the lender and the community. To mitigate these potential multiple losses, the lender will consider receiving a less than full payment in exchange for avoiding the expense and negative publicity of a foreclosure and the continued loss of time and money due to the expense of the non-productive asset .
The minimum elements of a short sale package are specified by the lender. There are usually one or more package cover letters. These can be a letter of authorization, which allows a third party to negotiate on behalf of the borrower, a cover letter summarizing the contents of the package offer, and most commonly, a hardship letter from the borrower stating the need to a short sale and the reasons the homeowner can’t make the payments.
The short sale package will support the hardship letter by including bank statements, pay stubs, tax returns, and other documents to prove the homeowner’s needs. Other requirements may include the borrower’s W-2, utility bills, and character references. Canceled checks or stamped receipts offer proof of bill payments and may be accepted by the lender to prove that the borrower resides in the home.
Additional documents can help the lender evaluate available options and costs. Depending on the lender, a price appraisal or opinion from a broker will help establish the value of the home under current conditions and in the market. Any inspections performed on the home should be included. A contractor’s bid sheet will cover the costs necessary to bring the house up to expected neighborhood codes and standards.
The borrower can add additional documents that support a lower value for the home and to argue that the lender will be in a worse position if foreclosure is pursued on the home. Documents added to the short sale package might include code violation citations for the property, a sheriff’s department report detailing nearby residences of sex offenders, or the presence of environmental or distasteful elements such as a nearby establishment industry or a busy highway. The homeowner will also want to include a statement of any latent defects or problems with the home that only the homeowner knows about and needs to disclose.
The real estate agent will provide the listing agreement and summaries of recent homes of the same type and close to the home in question. The agent will generally include a executed copy of the short sale offer and settlement documents. A copy of the letter requesting payment from the lender and the lender’s response is included. An orderly presentation of the short selling package can facilitate a more positive response from the lender and should help all parties involved understand the process.
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