When doing a short-sale, if two people are on the deed but only one of them is on the mortgage then do you need to still provide all documents (bank statements, financial statement, W-2s) for both people or only the person on the mortgage?
You will only need to provide financial documentation on the person who is on the mortgage - unless the other person on title is their spouse. If the other person on title is not a spouse, that person will need to prepare a quitclaim or “release of lien” (if they do have a lien on the property) and give that to escrow.
How do these people hold title? If title is held as “tenants in common,” most states will allow one or the other person to sell their tenancy without the knowledge or permission of the other tenant. In that case, the other title holder is simply treated as if they are one of the junior lien holders. So same deal here - they will need to submit a release of lien or quitclaim deed if no lien exists. Escrow can prepare all documents for you.
No. A short sale is the negotiation of a discount on a mortgage note. This means that when you are in negotiations the lender only needs to see the documentation of the individual(s) whose name appears on the loan itself. If person number two’s name is not on the loan, then they have no legal obligation to the lender, therefore any documentation from that person is pointless. Who is on title for the property is neither here nor there as far as a short sale is concerned.
The closing of the property is different however. Upon having a short sale offer accepted you will generally be re selling the property. For that resale you will need all parties who’s name are on the deed to sign the closing papers. But again, the person who’s name is on the deed and NOT on the mortgage note should have no part in the short sale process itself.
Having person number two quiteclaim the property to person number one will eliminate their needing to sign the closing papers.
GooD LucK! :beer
thanks for the answers. one last question:
what about for the purchase and sales contracts? Do you usually have the homeowners sign two (one to show bank that only has 1 person signing it and then another to keep for yourselves that has both people on title signing it?)
I’m assuming you wouldn’t want to show the bank the contract with both people signing it because then they might ask for the other person’s supporting documents. Please let me know if I am wrong here.
Whatever contract is in escrow is what the bank will see/use and escrow will only allow 1 contract to be used. As FN says, the easiest way to navigate this is for the other person on title to quitclaim to the first homeowner. Then the first homeowner can be the only one that need sign the contract.