What Should I Expect When I Sell?

A short sale often presents a good option for homeowners who are in danger of foreclosure or in default because of documented financial hardship.

The benefits of a short sale include:

1. A less severe hit to your credit history than what you'd experience with a foreclosure.

2. You continue to live in your house until the sale takes place.

3. In some cases, banks are offering homeowners cash incentives to do a short sale (to help with sales and moving expenses).

Because your credit history won't take as long to recover with a short sale as it would with a foreclosure – an average of two years versus seven years – the short sale option is great for sellers who want to own a home again in the near future.

Has your bank already contacted you?

Some banks have launched programs to prequalify homeowners for short sales. Through their records and housing data, they identify borrowers on their books who are in negative-equity situations. In this case, some are reaching out to borrowers in an attempt to further streamline the short sale process.

This makes it much easier for you, the seller, to proceed with a short sale.

Compiling your short sale package

Short sales require different paperwork than a normal home sale. In some instances, as mentioned above, your bank may have already qualified you for a short sale. In other cases, you and your agent will need to submit certain paperwork to your lender.

Your lender then decides whether or not to approve your request for a short sale.

Just what goes in a short sale package? Each lender is different, but in general, you will need:

 HUD-1 or preliminary net sheet

 Completed financial statement

 Letter of authorization to let your agent speak to the bank

 Letter that explains your financial hardship

 Two years of tax returns

 Two years of W-2s

 Last two months of bank statements

 Recent payroll stubs or other proof of income

 Comparative market analysis or list of recent comparable sales

Keep in mind that banks' processes vary, and the above list is a general representation of what many will want to see.

New federal guidelines shorten the wait

In the past, the notoriously long waiting game for short sales deterred many buyers from attempting them.

But times have changed. Many banks have streamlined the process and removed the barriers that have hamstrung short sales in the past. Some are even prequalifying borrowers to get the ball rolling faster.

In addition, federal guidelines have helped shorten the wait for mortgages owned by Fannie Mae and Freddie Mac. These are great changes for buyers and sellers, because it means there are regulations in place to help shorten the process.