Looking to Put the Pieces Together?
Here is a quick synopsis of how to get your home sold via a short sale. Each and every bank is different, so this is by no means a comprehensive list. These are also not in order, because it all should happen simultaneously:
1. Call your lender that is going to be affected (this could be a first and also a second loan) and ask for the loss mitigation department. Get full contact information of someone that can help you. Tell them about your situation and ask for a "short sale package" or a "hardship package." Even if you are not behind on payments yet, this is an important first step, as it serves as a notice to the bank and sets up expectations.
2. Complete that package and include a hardship letter, describing your situation and why you need to sell your home and why they will need to agree to a short sale. Words like "I'm sorry," "Beyond our control," "we are out of options," "what do you want from me to help," "we will cooperate fully" have gone a long way with others in the same situation in getting things smoothed out with the bank. Include any documents they require with the package, like pay stubs, tax statements, financial documents, listing agreements etc. etc. This whole assortment of documents should be sent initially and also when you get an offer for the home, as they are frequently misplaced or lost by the bank.
3. Get the house listed in the MLS as soon as possible, at a price point that is attractive enough to get some serious interest and offers. This might be at the low point of the houses' value range, given today's housing market and downward pressure on prices. Ultimately the bank will need to get Broker Price Opinions and Appraisals at different stages (especially when there is a contract,) to help justify the short sale approval. So you can't just give it away or they won't approve the deal anyway if they think it could be sold for a much higher amount. They have to weigh out the costs of letting the home go to foreclosure, which may or may not be a more expensive option for them.
4. Work closely with a local Realtor. Provide all the vital information for the situation, like loan numbers, lender contact info, how many payments are you behind, etc. etc. This will save time and enable that Realtor to successfully communicate with others regarding the situation.
5. Your Realtor will order an O&E, TBD and HUD-1 statement from a Title Company for the bank, since they will want to see those documents and see the costs involved in selling the home to get to the bottom line. Your Realtor will also communicate with the bank and provide a CMA and listing history for the bank, to help paint the picture of the local market for them.
6. Check the tax rules on short sales. Your Realtor is not a tax advisor. There is pending legislation regarding this, and only a tax advisor will be completely on top of it. You may or may not be responsible for taxes on the loan deficiency.
Throughout this process it would be important to document all conversations with the bank.
The odds of success increase as long as the bank has all of the information they need to approve the sale. The goal is to shorten the response time that it takes for the bank to approve the short sale once an offer has been presented. Too many times the delay kills the deal entirely, and the buyers move on to something easier to buy. That is the worst thing that can happen and must be avoided.
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