Short Sale Requirements - Posted by Monique

Posted by NJDave on May 24, 2000 at 11:58:10:

Most mortgagee short sale criteria require that the Borrowers provide a great deal of financial information including tax returns, personal financial statement, paystubs, bank statements, retirement account statements, etc. Frequently, the mortgagees also require that the Borrower are to receive ZERO proceeds from the Sale, that the premises are to be sold in an as-is condition, that any real estate commissions be slashed in half or eliminated entirely, and that the Seller be made aware that any forgiven debt may be treated as taxable income by the IRS.

Each mortgagee or mortgage loan servicer has it’s own set of criteria for short sale, and their own policy that dictates under what circumstances a short sale is considered. There may be a PMI Company (private mortgage insurance) whose approval is required, perhaps a master-servicer, or the loan may be part of a pool of mortgages that require even more special attention. FHA/VA mortgages are treated differently than conventional, as are some ‘affordable housing’ purchase money mortgage loans… that require the Borrower reside in the premises for a number of years or risk having to pay a premuim to pre-pay the loan.

Often, a BNK Trustee’s approval is required. In NJ, a BNK homeowner cannot even list his property for sale without BNK Trustee’s consent, let alone sell it.

There may be superior (to mortgage) liens including IRS and property taxes that need to be addressed, and often junior liens that need to be negotiated.

That’s why there are individuals who specialize in the administration of short sales… One deal can become a full time preoccupation that leaves little time to pursue new deals…

Short Sale Requirements - Posted by Monique

Posted by Monique on May 24, 2000 at 07:49:19:

We have contacted a lender holding the 2nd mortgage about a short sale on a house that we have under contract. Both the 1st and the 2nd are in default.

I expected them to want information about the status of the 1st mortgage and the settlement statement. In addition to these items, their “Loss Mitigation Department” requires that the seller provide: personal financial statement; 1998/1999 federal tax returns; last two months of bank statements; and, last paystub.

Is it common for a lender to require this amount of detail and this kind information to make a decision on an offer to pay them off? Getting these documents will require immense cooperation from the seller. I will find out today just how willing he is to work with us to make this sale happen. It would be useful to know if the requested info is common or unusual.

Thanks in advance!

Re: Short Sale Requirements - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 24, 2000 at 15:42:42:


I closed on a nice house just yesterday, and a short-sale of the second was a part of the deal. Yes, there are some documents you have to get together, but that’s not hard work, really. For the price of some documentation, the $19K second was short-sold for $6700 (35%), and I really think they would have gone lower since they didn’t even counter-offer. This is in lieu of the fact that their short-sale instructions said they never go lower than 60% of the balance.

It won’t always work, and not all short sales will be easy (as Dave impies), but it’s certainly worth the effort.