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Chapter 12 – Your Short Sale Document Checklist (full)

To ensure that the short sale process goes smoothly and that lenders get all the needed information, it is important to know what documents are needed from each individual involved in the transaction. Following this checklist can help sellers and buyers ensure that they have everything that the lender requires. Keep in mind, some lenders may require additional documents, so it is important that sellers and buyers check with lenders to ensure they provide all documentation needed to complete the short sale file.

Checklist for Shortsale Sellers

Financial Worksheet

Most lenders will require that all borrowers submit a completed, signed and dated financial worksheet. This worksheet will include information on all income coming into the home. It also includes all expenses, which includes the following:

    • Car payment
    • Electricity
    • Current house payment
    • Car gas expenditures
    • Cable
    • Grocery bills
    • Toiletry expenses
    • Car insurance
    • Health insurance
    • Doctor bills
    • Telephone bills
    • Garbage bills
    • Gas bills
    • Any other recurring expenses that are required

Hardship Letter

Sellers will also need to supply a hardship letter, which explains the circumstances that are forcing them to apply for the short sale. Borrowers must complete the hardship letter and turn it in signed and dated.

Authorization Letter

This letter is needed as a statement that authorizes the real estate agent to receive documents from the seller’s lender and to communicate with the seller’s lender as well.

Tax Information

Tax information should be submitted from the past two years. Tax documents that should be included are the following:

    • W2s
    • 1099s
    • Tax returns

Proof of Income

Items that provide proof of income will need to be submitted by the seller, helping to show that they are financially unable to continue paying their mortgage. The following are items that may need to be submitted:

    • Two recent pay stubs
    • Bank statements
    • Letters from anyone helping to assist with bill payments
    • Award letters (for financial assistance i.e. food stamps)
    • Profit and loss statements for individuals that are self-employed (usually three months of these statements will be required)

Checklist for Seller’s Real Estate Agent

*NOTE: Certain items may be provided by the seller if they are not using a real estate agent to help with the sale

Signed Purchase Agreement or Sales Contract

Both the sellers and the buyers will need to sign and date this document. If changes are made to the original contract, Addendums must be added, signed and then dated by the sellers and buyers as well.

Listing Agreement

The agent submits a listing agreement that is dated and signed, stating both the start and end dates of the home’s listing. The commission amount should be noted in the listing agreement as well.

Bank Sales Addendums

The seller’s lender provides these documents and all parties involved in the short sale must sign and date them.

Decline of Value

This form explains the reasons that the shortsale property has declined in value. It should include as much detail as possible to help increase the chance that the short sale purchase is approved.

Seller Net Sheet or HUD-1 Sheet

This form is dated and signed by the seller’s agent.

Copy of List as it Appears in Local MLS

The lender requires a copy of the listing, exactly as it most recently has appeared in local MLS listings.

Checklist for Short-Sale Buyers

Buyer’s Loan Prequalification Letter

Buyers are required to offer a loan prequalification letter to the lender or they may offer a desk top underwriting letter that comes from a direct lender. This information is needed if the buyer will not be paying for the entire sale in cash. If the buyer will be paying cash, documentation of available funds may be required by the lender.

Next: Appendix A: Sample forms and letters