How Does a Short Sale Work?

The short sale process is a fairly simple process, but is very detail specific. The first step in the process is to find an Investor to purchase your home or a Realtor to put your home for sale. Please keep in mind that your home is worth less than what you owe, so the price is not a major factor as in a traditional sale. Whoever purchases your house will be negotiating with the bank to clear up any liens on the title. The Investor/Realtor will have you fill out some paperwork and ask you to provide the documents below.

  • 2 most recent tax returns
  • 2 most recent W2's
  • 3 most recent bank statements
  • 2 most recent paycheck stubs
  • Hardship Letter
  • Copy of monthly mortgage statements 1st & 2nd
  • Copy of Deed

The paperwork you will be asked to fill out and sign includes the Authorization to Release Information form, which allows the Investor/Realtor to gather any pertinent information from the bank without making you be the middleman. The Hardship Letter is simply a letter explaining the reason you are trying to short sale your house. This letter is different for every situation, but an example would be "I am trying to short sale my house because I have recently lost my job and do not have the income to continue to pay the mortgage payment." The Real Estate Sales and Purchase Agreement is the document the Investor will have you sign saying you are selling your home showing you as the seller and Investor as the buyer. All of these documents along with the aforementioned are all-important parts of the Short Sale packet. Once all of the documents are ready

You will be asked to meet at the Investor/Realtor's office or at a title company to sign and complete the all the above documents with a Notary. The Notary will be there to witness both sets of signatures, yours (the seller) and the Investor (the buyer). At this point your job is basically done. All of this information will be put into a packet to send to the bank. Once the bank has all the required documentation they will start negotiating with the investor on a purchase price.

One of the last steps for you would only apply if you were still living in the home. The Bank will order what is called a (BPO) Broker Price Opinion which is very similar to an appraisal, but instead done by a Real Estate Broker to save the bank some money. When the BPO takes place the Broker will show up at the property and have the Investor/Realtor into the house allowing him/her to evaluate and create the realistic price the bank would like.

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