Short Sales 1-2-3

Thinking about doing a short sale? It’s really no different than listing your home normally. Here is a list of the things your real estate agent will ask you for and then send to the lender if he or she is handling a short sale for you.

1. Letter of Authorization. This letter allows the agent to call your lender on your behalf. Usually your agent will need the last four digits of your social security number as well as a good contact phone number.
2.Copy of last 2 years FEDERAL tax returns – all pages, and signed by you and/or your spouse in BLUE ink.
3. Enough paystubs for a ONE MONTH pay period
Loan Statement (for each loan)
4. Completed Budget or Financial Statement (signed) by you.
5. Hardship Letter – where you’ll briefly describe the reason for your hardship. Include any/all documents/pictures to support hardship. Example: roof receipts, pictures of old roof, medical bills, divorce papers, loss of income, etc.
6. Copies of last three (3) MONTHS bank statements – ALL PAGES – even the junk pages that you don’t think are relevant. If the bank statement says page 2 of 4 make sure that page 4 is included too.
7. Document any “special income”. For example if you receive Social Security Income include the annual letter from Social Security. If divorced, include the spousal income. Rental income, include a copy of a rental agreement.
8. Listing agreement – filled out and signed by the seller and agent.
9. Purchase contract – filled out and signed by buyer and seller.
10. Preapproval letter from buyer’s lender. A normal letter that shows that the purchaser is qualified and able to purchase the home.
11. A copy of buyer’s earnest money.
12. A HUD-1 statement. This is usually prepared by the escrow company and shows the lender(s) how much money the sale will net them after all expenses have been paid.

If you have hired a real estate agent to list your home, the bank is fully prepared to pay all the costs involved in the sale.
Write your LOAN NUMBER at the TOP of all pages in LARGE LETTERS.



A short sale is the process through which your mortgage company agrees to sell the home at current market value which is usually less than what is owed to them. They do this as an alternative to the expensive and time consuming process of foreclosure, bankruptcy and/or eviction.

Each mortgage company has their own set of processes through which they decide whether or not to accept a short sale, and while there are many similarities, each has its own requirements for approval.

As a third party mediator, we have a distinct advantage in negotiating with your mortgage company. Here is how it works:

First you will need to list your home. Easy enough, then fill out the brief application forms that we will provide to you. Once all of the forms are completed we will fax them to the mortgage company to let them know that we are working on your behalf.

Then the lender will issue a “workout package”. This is the lenders list of instructions and requirements for considering a short sale.

Some of the things they will likely require are:

1. Financial Application – fill out a form the bank supplies.
2. Hardship letter.
3. Last 2 paystubs for all borrowers (including L&I and unemployment benefit.).
4. Last 2 years tax returns.
5. Last 2 bank statements.
6. Last 6 months of Profit and Loss statement (if self employed)
7. Third Party Authorization which allows someone other than the borrower to obtain your personal information.

One of the most critical aspects of a successful short sale involves writing a compelling hardship letter. You want the letter to be believable, and yet not come off like a person who is interested in taking advantage of the bank’s generosity. So here is an example of a successful and free hardship letter. It is my pleasure to offer it to you in the hopes that it will be of assistance to you.

To Whom It May Concern:
This letter is to explain our hardship situation. On or about December 2, 2008, my husband was suddenly and unexpectedly laid off on his job. He found employment at another firm on Dec. 15th, but this employer cut his hours after only two weeks of work. Unfortunately, the same thing happened to me – my employer cut my hours and then closed down for good. I am still looking for work, and we have decided that we are going to have to move in order to find better-paying jobs for ourselves and our two children. We have cut out all our entertainment expenses – including attending Bible study – to save on gasoline. We really want to save our house, but if we can’t,we would not want to file for bankruptcy. It is against our principles, but if push comes to shove and we have to file for bankruptcy in order to avoid foreclosure, then we will. We are asking you to please help us in this time of national financial crisis, and work with our realtor to do a short sale. We sincerely appreciate your help in this matter.
Yours truly,
John Smith

Please note: it is important to use the phrase, “we do not wish to file for bankruptcy” in your letter. Why? Because the last thing that the lender wants to get involved in is a bankruptcy, and/or eviction. It lengthens the time involved considerably!
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Feel free to post your comments or any questions you might have. Good luck!