Documents Needed for a Short Sale

A short sale is a transaction in which a homeowner sells a property for less than what is owed, the lender takes a loss, and any unpaid balance is forgiven. For this to happen, a set of documents is needed.

Main Documents:

(Download List)

Hardship Letter. This is a personal letter, from the homeowner to the lender, explaining the reasons for being unable to continue paying the mortgage. This is a critical document. To be effective, it must clearly state the situation, show concern, and demonstrate that the homeowner is taking action for the problem to be resolved. It is best if this note is hand written and not very long.
Homeowner’s financial statement. This is a worksheet presenting all income, assets and liabilities. The homeowner and all co-borrowers must be included.
Latest two bank statements. If the homeowner has more than one account, all the statements must be presented.
Latest two pay stubs. If the homeowner has more than one job, all the stubs must be shown. Unemployed homeowners must present the latest available. Self-employed individuals can provide a profit and loss report.
Last two years tax returns. Often, homeowners in foreclosure have missed filing their taxes. In this case, present the latest available and write a personal note to the lender explaining the situation.
Last two years W-2s. Employers provide this to employees and the IRS every year. Provide the latest available.

Supplemental Documents. In addition, if relevant and available, the following documents are very useful. In some instances, they are absolutely necessary.

Death certificate
Divorce decree
Incarceration decree
Bankruptcy discharge letter
Relief from stay
Proof of disability
Insurance claims
Police reports
Court approvals
Anything that may be useful

Additional Documents. Once in contact with the lender, these two additional documents will be needed. These documents should be prepared by the professional negotating the short sale.

These are the documents needed for a short sale to be negotiated. The more complete, the better. The degree of what is acceptable varies from lender to lender. Some lenders are more demanding than others. Have all these documents. The short sale will go a lot smoother.

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