What Documents are Required to Close on a Short Sale?

April 17, 2013 No Comments »
What Documents are Required to Close on a Short Sale?

Are you interested in purchasing a short sale? Is this something you have been considering for a long time? While you may think this is nothing more than another real estate transaction, nothing could be further from the truth.

The same holds true if you are on the other side of the fence, looking to “short sell” your property as a way of escaping a bad financial situation.

Generally speaking, there are documents required to close a short sale that are not required when buying a property in a more traditional manner. Although this will result in more paperwork and a longer process, there is nothing so complex that you should be scared away.

Some of these documents pertain to both the buyer and seller, while others are only for one party:

Purchase Contract

If you don’t have a complete contract you are going to face delays. For this reason, you should know what the bank is expecting and then move forward from there. For instance, some may accept electronically signed purchase contracts while others do not.

Seller’s Hardship Letter

As you can imagine, this is one of the most important parts of a short sale package. This tells the story of why the seller is in this position and why this is the only solution to their problem. Make sure the letter contains the loan number as well as the seller’s signature.

Authorization Letter

In short, this is a letter that is signed by the seller authorizing the bank to speak with a listing agent. This may not appear to be a big deal, but without this letter the agent is unable to negotiate a sale.

Bank Statements

Most lenders require the last two bank statements, while others will request more. As a seller, if there are any large deposits or withdrawals you may have to explain the reason in greater detail.

Tax Returns

Just the same as bank statements, the last two years of your tax return are required. This should include signed and dated returns, as well as all pages and schedules. The bank wants to see everything.

Estimated HUD-1

This is an estimated closing statement that is typically handled by a closing company or escrow officer (attorney). This contains a lot of important information including the address of the property, seller’s name, buyer’s name, closing date, and costs associated with the closing.

Final Word

Does all this sound confusing? If you are a homeowner interested in a short sale, you need to work closely with your lender to move forward with the appropriate paperwork.

On the other side of things, buyers should consider finding a local real estate agent with experience buying short sale properties. When you have someone with experience with the process, there is a significantly less chance that you will forget to submit the required documents.

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