Short sale documentation

Prodempsey, if you’re around, I’d like some advice from a loss mitigator’s perspective…

I’m in the process of attempting 2 short sales with different banks. The first one was so close to the foreclosure date that I had to rush in an offer as soon as I (finally) located the owner stationed overseas. As such, I didn’t send in anything like a “list of reasons” you mentioned in another post.

Fortunately the other house is very early in the process and I have time to do more homework. The owner had the house appraised about a year ago for $242k, but I’m certain that the comps won’t come up any higher than $230k. The primary mortgage balance is about $228k (without the back payments and legal fees), and the second is $11k.

Here’s what I have planned:

  • photos of all damage/rehab needed
  • repair estimates from contractor(s) for above listed damage
  • CMA report

Is there anything else that would help convince someone like yourself to accept a fairly low offer? Advice or comments from others are welcome too… TIA

Anyone have any thoughts? ???

You will probably need a complete short sale package…ie, Tax Returns from the owner, paystub, credit report, hardship letter.
If your not sure what to include for the bank then call them up and ask them what they need. Some banks are different. Some also require that the house is listed for 90 days.
Good Luck

Thanks for the response, Edge. I should have mentioned that the bank already requested a hardship letter from the owner, so I have him working on that.

One more question - If I ask the bank, will they tell me who they are sending out for an appraisal, and when they will be there? I’d like to go along when they go through the house if possible.

The bank will probably need you to let the appraiser in so usually it is ok if you walk thru with the appraiser and point out how rough the property is.
Good Luck

Sorry it took so long for me to get back to you.

Sounds like your on track so far by getting the photos, repair estimates, and the CMA.

I would also add as your cover page a summary sheet with a comparison of how much they will loose by taking it through foreclosure vs. taking your offer, and at the bottom of the page in bold, “Net Amount to ___ Bank if property acquired and marketed = $” vs. “Net Amount to ___ Bank with shortsale offer = $”

Shortsales are very convincing to loss mitigators if there are a lot of repairs that need to be done.

Speaking of repairs, this is a little off subject but here’s a tip: If I’m the loss mitigator for the bank, and I’m working on a shortsale on a condemned property, I’m going to give a heavy discount to get rid of it. Trust me you’re going to pratically steal it!

Anyway, back to Hoste’s question, more than likely the lender is going to send an appraiser out the property, and this is what is going to make or break your deal. Show your contractor estimates and sales comparables to the appraiser when they come out. But there is no guarantee. If the shortsale doesn’t work out, and if there’s really not a lot of repairs that need to be done (less than $2k) get the deed, but don’t record it, then sell the house with owner financing.

Please excuse my ignorance, but when would a short sale come into play. I understand that can be your best opportunity to “steal” a deal but what is the window of opportunity to pursue it


Please understand that any shortsale is not your best opportunity to “steal” a deal. I was only referring to shortsales with condemed properties above as far as stealing a deal. In general, I hate doing short sales!!! They require so much work, and everything is dependant on some elses decision. There is no guarantee it will work most of the time.

Thanks for the feedback. It turns out that the comps show the property value to be only in the $210k ~$220k range. I don’t have all of the bids back on repairs, but they are probably in the neighborhood of $8k ~$10k. Do you think the bank would accept an offer of $180k?

I wouldn’t offer them $180k if I were you. If the value is $210k there wouldn’t be any profit left in the deal after you did the $10k in repairs, paid the holding costs for at least 4 months (about $6k) , and then the closing costs (about $10k). Maybe at least an offer of $147k or $137k, and if it doesn’t get accepted, then you do not need this deal. There are better deals out there.

Thanks for the info. Maybe I’m trying to be too conservative. The worst thing they could do is say no, right?

I’m in the process of collecting the final numbers and I’ll put them in my spreadsheet to come up with what my actual max offer will be. I’ll post back later…