Lender Requirements for Consideration of “Short Sale” Approval
July 28th, 2007 categories: Buying San Diego Real Estate, San Diego Real Estate Legal, San Diego Real Estate News, Selling San Diego Real Estate
Lenders today are well aware of the situation some homeowners find themselves in and they will work with the Homeowner as long as certain criteria is obtained and presented showing the proper due diligence by both the Homeowner and the Agent.
The lenders concerns are three fold.
1. The Lender wants to see what the Homeowner has agreed to with the purchaser.
This can be a difficult negotiation but the Lender wants to see that the homeowner is not walking away with any cash and that the Buyer has agreed to pay all costs associated with the transaction. The net cash to seller in the purchase agreement must be the amount of the short Pay to the lender. The Lender will also require a Preliminary HUD-1 Statement. If Escrow wont do this, then Agent has to.
2. The Lender wants an accurate picture of what is the property worth in todays market.
Though it is not required, when an agents prepares the Comparative Market Analysis, if an agent is aggressive with this, they would also hire and pay for a pre-appraisal on the property. If there is deferred maintenance or other repair issues on the property, the lender also wants to see a Contractors bid for the repairs.
3. What is the accurate situation with the homeowner and proof that the homeowner is in dire need of assistance.
Provide as much information about the situation with the homeowner and proof that they are insolvent and that they they have no other source of income or assets to repay the loan. This will entail a current and complete financial picture that must also include a hardship letter that explains the homeowners situation and reasons why the lender should approve the short sale.
The following is a list of Documentation that must be completed prior to getting lender approval.
- Hardship letter from the Homeowner
- Completed Financial Statements
- Documents proving the Hardship
- IRS tax Returns for 2 years
- Income statements or pay stubs for past 2 months.
- 4 months worth of Bank Statements
- Copy of the Listing Agreement
- A Sales Contract from the Buyer
- Preliminary HUD-1
- Marketing History by the Agent
- Subordination of any Junior Lien Holders
If the Lender Agrees to a Short Sale, they will expect closing to take place prior to 45 days. 30 days is most preferred by many Lenders. If the transaction does not close on time, they will withdraw their offer. It is essential that the Lender see a complete picture prior to granting approval. If there are any substantive changes, they are not obligated too complete this sale and will likely withdraw. No surprises will be accepted. Best to have every little detail agreed to in advance, especially with the Buyer and the Seller.
Got here from a link on Colleen’s AR post. Really glad we did. The graphics and design interface here is terrific. Very creative and informative. We’ll be back… as all in your market should be as well.
William,
This is my first time at your blog and what an impressive outlay you have. Excellent!
-Gena Riede
Hello Richard,
Thank You so very much for your gracious comments and compliment. I look forward to commenting on your posts, and I will be going there later today. many Thanks Again.
William
Hello Gena, Sorry I am so long getting back to you.Thanks you so much for nice comments and know that I will referring a client to you shortly.
Sincerely,
William