If you are struggling to pay your mortgage and are concerned that the bank may want to start foreclosure proceedings, you may be considering a short sale of your home.  If this is the case, then one of the most important things you can do is to communicate with your lender.  It is important to be upfront with the lender so that they know you are honestly trying to pay what you owe them the best that you can.

Professionals that can Help

Contact an accountant, an attorney, and most importantly, a realtor.   An accountant can help you piece together your actual financial situation so that you can determine whether you qualify to proceed with a shot sale.  An attorney can help you through the legal issues connected with foreclosures and short sales.  A realtor will be invaluable in helping you set a fair market price for the home, in locating a buyer, in negotiating with the lender, and in handling the paperwork that is required.

Documentation You May Have to Provide

  • Letter of Authorization.  Because there a short sale will involve quite a few different people, it is important that communication is open and that pertinent information can be shared.  Before your bank will share personal information, they must receive a letter of authorization from you.  This letter should include your name, contact information, the property address, the account number of the loan, the date, and the name and contact information for your realtor.
  • Proof of Income and Financial Statement.  Because hardship must be proven, your lender will require you to fully disclose your income and expenses.  You will need such documents as paystubs, W-2 forms, tax returns, bank statements, investment information, savings, the amount of cash you have on hand, and so forth.  In addition, you will need to provide evidence that you are struggling financially by including late bill statements, receipts from items you have pawned, and so forth.
  • Preliminary Net Sheet.  Your real estate agent can help you estimate the price you plan to charge when selling the home, as well as all of the expenses connected to the sale.  The statement should also include information regarding loan balances that are unpaid and any fees that have been charged by the lender.
  • CMA (Comparative Market Analysis.)  Particularly if the home market is not doing well in your area, it may be difficult for you to ask a price that will pay the full amount you owe on your loan.  A CMA report prepared by a competent real estate agent will show the prices being asked for homes like yours that are currently on the market, as well as similar homes that have been sold in the 6 months previous or are in the process of being sold but are not yet closed.  This information can prove to a lender the need for a lower asking price on your home.

After these first steps are taken, a buyer must be found and make an offer.  The bank must agree to begin the short sale process and the buyer must be approved.  The process could take 90 to 120 days, so it is important to remain patient.