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8 Steps of a
Short Sale |
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Obtain an executed a purchase agreement.
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Seller/borrower to submit a complete short sale
information package to the lender as requested and
required. This usually consist of two years of W-2
and/or 1099 forms, two years of federal income tax
returns, ninety days complete bank statements,
financial assets & liabilities, other debt
obligations and a personal profit & loss statement
(P&L) along with a Hardship
(SAD) Letter.
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Validation of hardship of the borrower by lender. Some
common hardships are: Death of a family member.
Divorce. Involuntary job loss. Sudden loss of
income. Involuntary transfer of job. Large
unexpected expenses...
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The lender then orders a Broker Price Opinion (BPO)
from a third-party agent. Be aware that if the
purchase price is not within range of this BPO, the
contract will most likely not get approved.
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The lender will then review the closing costs and
fees when the HUD 1 is sent to them. This is a
Settlement Statement to make sure that the costs
that they
are absorbing are acceptable.
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If there is a subordinate lien holder (2nd and/or
3rd loan),
the primary lender/servicer will determine the
amount to be distributed to this lien holder. It
is almost always less than ten (10%) percent of the
loan balance of the subordinate loan. The
borrower/seller will need to be released from BOTH
the lien and the note if possible.
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The package is then reviewed for approval by the
investor.
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If
the investor approves the package, the transaction
is now back in the seller/borrower’s and buyer’s
court to decide if they want to mutually proceed
with the transaction.
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