What is a short sale?
A SHORT SALE IS WHEN A
HOMEOWNER HAS A MORTGAGE
AND THE AMOUNT OF THAT
MORTGAGE IS HIGHER THEN THE
VALUE OF THE HOME. IN SOME
CASES, THIS SHORTAGE RANGES
BETWEEN $50,000-$100,000 IN
Can a Realtor Negotiate a Short
Sale for a Seller?
ABSOLUTELY! IT’S A MATTER OF CALLING THE
LENDER OR LENDERS (WHEN TWO MORTGAGES
ARE INVOLVED) AND SUBMITTING ALL OF THE
PAPERWORK TO THEM AND FOLLOWING UP.
Know What You Are Getting Into
A SHORT SALE CAN BE A VERY LENGTHY AND
TIME CONSUMING ENDEAVOR. LENDERS WHO
ARE ULTIMATELY GOING TO ACCEPT LESS
THEN WHAT THEY ARE OWED HAVE VERY
STRICT GUIDELINES AS TO WHAT THEY WILL
ACCEPT FOR PAPERWORK TO APPROVE THE
SHORT SALE. THESE LENDERS ALSO REQUIRE
CONSTANT AND ONGOING FOLLOW UP SINCE
THERE ARE HUNDREDS OF THOUSANDS OF
SHORT SALES BEING NEGOTIATED AT ANY ONE
There are attorneys and debt
negotiating firms that will negotiate a
short sale for you, but many will
charge an up front fee to the seller
as well as a percentage of the
negotiated pay off (1-2%)
Since many sellers do not have the additional
money to pay the 1-2% they rely on the bank to
pay that on their behalf. Often the bank has a
capped percentage they are willing to pay all
parties (including you) so if they are paying a debt
negotiator that may mean that you receive a
Whether You Decide to Use a
Short Sale Company Or Not
this presentation will give you
all the tools you need to
negotiate a short sale
So You have a Listing that’s a
Short Sale. Now What?
HAVE THE SELLER
SIGN THE LISTING
Inputting into MLS
-WHEN THE PROPERTY
GOES INTO MLS BE
CAREFUL HOW YOU
- If you disclose in MLS that
you are paying 3% to
cooperating brokers you have
to pay that, no matter what
(even if the lender agrees to a
-DON’T FORGET THAT YOUR
COMMISSION RATE MUST BE
APPROVED BY THE “3RD PARTY”
AKA THE BANK YOU ARE
-IF YOU PROMISE TO PAY 3%
AND THE BANK THEN ONLY
APPROVES A 4%
COMMISSION THEN YOU
WILL ONLY GET PAID 1%.
ALWAYS DISCLOSE IN MLS
THAT ACCEPTANCE OF
OFFERS IS CONDITIONED
UPON 3RD PARTY APPROVAL
(That only applies to the offer
– not the cooperating
AS SOON AS THE PROPERTY IS LISTED
REQUIRE THAT THE SELLER PROVIDE YOU
ALL OF THE PAPERWORK YOU WILL NEED
TO FACILITATE THE SHORT SALE
Many lenders will negotiate
prior to an offer coming in on
the property and some will preapprove the short sale price in
advance. Either way, it’s good
business to get all of the
paperwork you need in
If you have a seller that is lax in getting
you paperwork, this will significantly
impact your ability to sell the property.
I recommend getting all of the
paperwork you need right away or
delay listing the property until you do.
The Short Sale Package
WE HAVE A VERY DETAILED CHECKLIST OF
PAPERWORK THAT THE SELLER MUST
PROVIDE. IF THE SELLER PROVIDES
EVERYTHING LISTED ON THE CHECKLIST,
NORMALLY THERE IS NOTHING ADDITIONAL
THAT THE BANK WILL REQUIRE.
WHAT IS MOST IMPORTANT IS THAT YOU FIND
OUT FROM YOUR SELLER WHAT LENDER OR
LENDERS ARE HOLDING LIENS AGAINST THE
PROPERTY. IF THE SELLER DOES PROVIDE THE
COMPLETE PACKAGE WE REQUEST, WE WILL
FIND THIS OUT RIGHT AWAY.
Liens Against the Property
WHAT COULD HAPPEN IF YOU AREN’T AWARE
OF ALL THE LIENS AGAINST THE PROPERTY?
YOU COULD SPEND MONTHS
NEGOTIATING A SHORT SALE ON ONE
MORTGAGE ONLY TO FIND OUT PRIOR
TO CLOSING THAT A SECOND ONE IS
Liens Against the Property
THAT WOULD MEAN THAT IT’S BACK TO THE
DRAWING BOARD. YOU’D HAVE TO START
FROM SCRATCH NEGOTIATING WITH BOTH
(LATER ON IN TODAY’S PRESENTATION WE
WILL TALK ABOUT HOW TO NEGOTIATE WHEN
MULTIPLE LIENS EXIST)
How Do You Protect Yourself
from finding out late in the
game that more then one lien
exists against the property?
1. Tell the seller to give you copies of all
outstanding mortgage statements.
2. Do a registry of deeds search yourself.
3. Require the seller to provide you with a
copy of a tri-merged credit report within 30
days of your starting the short sale
4. Work with a real estate attorney who
can do a preliminary title search for you.
WE’VE PREPARED THE HANDY CHECKLIST FOR YOU
TO USE IN PUTTING A DETAILED PACKAGE
BY CALLING THE LOSS MITIGATION
DEPARTMENT OF THE BANK(S) RIGHT
AWAY YOU MAY FIND THAT SOME OF
THIS PAPERWORK IS NOT REQUIRED.
Let’s Take a Look at What
Paperwork is required and why
There are a series of disclosures that
we advise you to have the seller sign as
part of the short sale process.
- Verifies identity as part of the Homeland Security
Many lenders require this disclosure be signed so
have it as part of your short sale package.
- You should verify the seller’s information of a valid
license or i.d.
Authorization to Release
-This gives YOU the ability to negotiate on the sellers
Explains to seller that taxes may be due!
Mortgage Forgiveness Handout
Explains to seller that taxes probably won’t be due!
Direct Clients to: IRS.GOV
SEARCH TERM: Mortgage Forgiveness Debt Relief
This form explains to the seller all of the items they should
and shouldn’t do once a short sale is in process.
-Make sure the client fills
this out accurately! If you fill
it out for them you are
opening yourself up to
-Make sure the client signs
-Make sure they include ALL
Other Documentation the Seller
-2 YEARS TAX RETURNS
-2 YEARS W2S
-2 MONTHS SAVINGS & CHECKING
-PROOF OF STOCKS, BONDS, 401K
-ONE MONTH’S PAY STUBS
WHEN IT COMES TO PROVIDING THE FINANCIALS IT’S
IMPORTANT THAT THE SELLER PROVIDE EVERYTHING
ON THE CHECKLIST. IF ONE ITEM IS MISSING IT MAY
RESULT IN WEEKS OF ADDITIONAL WAITING TO GET
THE SHORT SALE COMPLETED
WHAT THE LENDER IS LOOKING FOR
WHEN IT COMES TO THE FINANCIALS IS
WHETHER OR NOT THE SELLER HAS THE
ABILITY TO PAY SOME OF THE SHORT
SALE OUT OF HIS OR HER ASSETS
ADVISE THE SELLER THAT IT IS FRAUD TO
HIDE ASSETS OR INCOME FROM THE LENDER.
ALSO, TYPICALLY, A LARGE AMOUNT OF FUNDS
IN A RETIREMENT ACCOUNT SUCH AS A 401K
WILL NOT AFFECT THE LENDER’S DECISION
SINCE THIS MONEY IS NOT CONSIDERED
IN ADDITION TO CLIENT
YOU WILL ALSO WANT TO
COLLECT PROOF OF ALL
DEBTS AGAINST THE
Debts Against The Property
-MOST RECENT MORTGAGE STATEMENT FOR
ALL PROPERTIES AND ALL MORTGAGES
-ANY CORRESPONDENCE FROM THE LENDER
REGARDING THIS MORTGAGE
-COPY OF WATER/SEWER BILLS
-COPIES OF ANY RECENT COURT JUDGMENTS
Why do we need such detailed
info regarding debts against the
WE HAVE TO GIVE THE BANK(S) PROOF OF HOW
MUCH THEY WILL WALK AWAY WITH AFTER THE
SALE IS COMPLETED. WITHOUT DETAILED
INFORMATION ABOUT ALL DEBTS AGAINST THE
PROPERTY WE CAN’T GIVE DETAILED
INFORMATION TO THE BANK(S) WHICH WILL
RESULT IN A DELAYED CLOSING.
Debts Against The Property
WE WANT TO KNOW IF THERE ARE MULTIPLE
MORTGAGES ON THE PROPERTY.
WE WANT TO KNOW HOW FAR BEHIND THE
SELLER IS IN PAYMENTS
WE WANT TO KNOW IF A CREDITOR HAS PUT A
LIEN ON THE PROPERTY.
LAST… You MUST require your
seller to provide a detailed
-Make sure it’s from
-Make sure it’s from the
-Handwritten is fine.
What happens once the seller has
provided all of the paperwork?
Contact the lender or lenders and
request the Loss Mitigation
Sample Contact Info for
Bank of America
Short Sales 1-866-880-1232
Short Sale Fax 1-888-491-4947
Home Retention Department 1-800-669-0102 call to open Short Sale after faxing
Letter of Authorization Fax 888-491-4947 or 805-520-5019
Foreclosure Dept 1-800-669-6650
Homeowner update financials 1-800-669-6650 (Home Retention Dept)
Email format Firstname.Lastname@bankofamerica.com
Bank of America/Countrywide Instructions To Sellers Agents.pdf
Bank of America Approval Letter.pdf
BOFA Approval 2.pdf
BofA Credit Line SS Application.pdf
The Loss Mitigation Department
will ask you to fax over the
authorization which gives them
permission to speak with you.
Most lenders will advise you to
call back 48 hours after faxing
When you do speak to the Loss
Mitigation Department ask them
to fax you the list of required
documents for starting a short
Some lenders will only mail that
package to the seller. In that case
you would notify the seller to
forward the package to you
If you have completed the short
sale checklist provided earlier
with the seller then you will most
likely have all the documentation
you need to submit to the
Some banks will not review your
package until you have an offer.
If that is the case, don’t submit
the package incomplete – wait for
READ THE BANK(S) SHORT
SALE PACKAGE IN DETAIL AND
-If there are multiple banks
contact all of them for packages.
-If the bank(s) loss mitigation
department does not require an
offer, submit everything for a
short sale pre-approval.
Most lenders will not open a
short sale file until there is an
offer on the property.
Therefore, you will normally wait for an
offer prior to submitting the short sale
AGAIN…Even if you’re working
with a bank that requires an offer
prior to submitting paperwork,
please get all of the paperwork
from your seller up front. You
don’t want to find out 3 months
from now that your seller is
uncooperative on getting
How do I Price a Property if I
don’t know what the bank will
Most banks will accept an offer if
it’s Fair Market Value.
YIKES… AN OFFER!
SO… You have the seller disclosures… you
have the seller financial statements… and
NOW You have an offer. What’s Next?
Check Out Our Easy Realtor Checklist for putting together the LAST section of
our short sale package (again some lender’s won’t require all of this so read the
bank(s) short sale package first.
The Realtor Must Provide
-MLS Sheet on the Property
-Purchase and Sale Agreement or offer
-CMA on the property justifying the offered price
-Pre-Approval Letter for the Buyer
-Purchase and Sale Addendum if the P&S has been
The Listing Contract
The listing contract must be provided because part of
the expense in selling the home includes a Realtor
commission. Usually the lender will only pay 4-6% of
the list price. Under a recent FNMA Announcement –
FNMA ruled that the bank may NOT negotiate the
agent’s commission below 6% if that was stipulated
for on the listing contract. THIS ONLY APPLIES TO
FNMA LOANS THAT ARE GOING THROUGH THE
SHORT SALE PROCESS.
The market analysis is key to show
the lender that the offered price is
fair based on the market.
The pre-approval is necessary so
that YOU and the lender know that
you are dealing with a ready,
willing, and able buyer.
Make sure that the offer says “this
offer is subject to third party
Some Banks Will Require a P&S
If the bank requires you to go right
to P&S then make sure you have
provided an addendum which
states “Subject to Third Party
One of the smartest things an agent can
do is to submit a detailed CMA along
with the short sale package. The bank
is going to do their own appraisal, but
you may save time by giving the bank
the info they need in advance.
A Detailed HUD 1 Settlement
It’s EXTREMELY IMPORTANT to
submit a detailed HUD 1 Settlement
Statement based on the price
offered. Use a good closing
attorney and make sure they do a
Some Short Sale Companies use
what is called a Net Sheet
The NET Sheet is LIKE a HUD but
not as detailed. GET A DETAILED
HUD SETTLEMENT STATEMENT
NO MATTER WHAT!
On The HUD Sheet
-Make sure to include all past due amounts
due to the bank
-Make sure to include all water/sewer fees
-Make sure to include any outstanding
-Past due taxes
-Past due condo fees
Why you Should NOT prepare
the HUD 1 or Net Sheet
Let’s say you prepare an
estimated net sheet and you
guess at taxes owed, lien
balances, commissions, etc.
Let’s then say that the short sale
is approved, the closing date is
set, and everyone’s ready to go
and the lender thinks they are
netting $175K based on your
Then, on the day of closing, there
were additional taxes owed on the
property, or a judgment lien, or
the payoff is much higher… so
the lender is only going to get
If the lender’s figures are
significantly off from the Net
Sheet, then no closing will take
place and the file will need to be
Don’t use a net sheet.
Don’t guess closing figures.
Use a competent attorney and a
preliminary HUD Settlement
You have the sellers disclosures,
seller’s financial statements,
proof of all debt against the
property, hardship letter, offer (or
P&S) plus everything you put
together on your end… so you’re
ready to submit!
Once you have EVERYTHING
submit it to the loss mitigation
department at the bank. They
will tell you where to submit and
how on the short sale checklist
When You Submit Make Sure to
Give a Good Cover Letter
detailing everything you’ve
Ask the lender or lenders how
long until the file will be received
in the loss mitigation department
and then follow up diligently to
make sure it’s received.
Short sales take an average
of 60-90 days… some take
The key is to follow up with the
bank’s at least three times a
week to check on status.
Throughout the waiting it’s
important to remind the client
regularly to keep you informed of
any verbal or written
communication they receive from
Keep a detailed phone record of
every call you make to the
bank(s). Some short sales are not
successful and you want to
protect yourself from litigation.
The lender will eventually contact
you with either an acceptance,
decline, or counter offer.
Your eventual goal is to get an approval
which will look like this:
Your eventual goal is to get an approval
which will look like this:
Upon approval the bank(s)
will give you a certain number
of days for which the approval
is good for.
If you cannot close by the
date stipulated on the short
sale approval then ask for an
Once you’re approval has
gone through the banks will
give extensions for usually
The buyer’s bank will need to
have a copy of the short sale
approval letter so that the
buyer’s closing attorney will
know the payoff amount.
From there on in… it’s a nice
For More Information on
Distressed Property Sales Make
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