8 Steps of a Short Sale

Typical 8 Steps of a Short Sale

  1. Obtain an executed a purchase agreement.

  2. Seller/borrower to submit a complete short sale information package to the lender as requested and required. This usually consist of two years of W-2 and/or 1099 forms, two years of federal income tax returns, ninety days complete bank statements, financial assets & liabilities, other debt obligations and a personal profit & loss statement (P&L) along with a Hardship (SAD) Letter.

  3. Validation of hardship of the borrower by lender. Some common hardships are: Death of a family member. Divorce. Involuntary job loss. Sudden loss of income. Involuntary transfer of job. Large unexpected expenses…

  4. The lender then orders a Broker Price Opinion (BPO) from a third-party agent.   Be aware that if the purchase price is not within range of this BPO, the contract will most likely not get approved.

  5. The lender will then review the closing costs and fees when the HUD 1 is sent to them.  This is a Settlement Statement to make sure that the costs that they are absorbing are acceptable.

  6. If there is a subordinate lien holder (2nd and/or 3rd loan), the primary lender/servicer will determine the amount to be distributed to this lien holder.  It is almost always less than ten (10%) percent of the loan balance of the subordinate loan.  The borrower/seller will need to be released from BOTH the lien and the note if possible.

  7. The package is then reviewed for approval by the investor.

  8. If the investor approves the package, the transaction is now back in the seller/borrower’s and buyer’s court to decide if they want to mutually proceed with the transaction.

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