Posted about 12 years ago

Required Paperwork for Submitting a Generic Short Sale Packet

There is a great deal of paperwork needed for a short sale and certain banks may require specific documents.  When it comes time to sign the paperwork with the investor, it is best to do so at a title company, as a good Title Company will be able to create a Settlement Statement (HUD-1) for the investor and should also be able to provide a third party notary.  It is strongly recommended that you seek legal guidance while creating a short sales packet.  However, the following are some of the forms generally needed to perform a short sale:

  • Authorization to release information.  Required form for bank.  The homeowner authorizes investor, their staff, partners, and Title Company, to talk to the bank, creditors, and/or lien holders about this mortgage only on the homeowners’ behalf. 


  • Real Estate Sales and/or Purchase Contract. Required form for bankWill generally recommend using whatever the state approved and recognized contract is for your state.  If the typical state approved contract does not specify much in regards to short sale, then you and your attorney may wish to create a specific Short Sales Addendum to add to your packet.  The Purchase contract should outline sale of house between buyer and seller.  It is important to remember that the sales price will be determined between the bank and the investor.  The homeowner will not determine, impact, or influence the sales price of this transaction since a short is occurring.
  • Short Sale Addendum.  Most state approved contracts fail to delve into short sale specific situations.  As such, you will want to work with a real estate attorney to create an addendum that will better explain the short sale process and some of the risks invovled.  The following are some typical examples of items to put in a short sale addendum:
    • Final sale is contingent upon successful Short Sale and approval from Seller’s Lender, as well as approval from Buyer’s attorney.
    • Seller understands that Buyer is purchasing Property under market value and Seller clearly understands the Buyer will list this Property for sale and will make every effort to resell this property at a profit.
    • Seller also clearly understands that Seller will NOT be allowed to financially profit from the Short Sale of this Property.
    • During negotiations, there may be several different preliminary contracts with different estimated purchase prices submitted by Buyer to the lender(s) until a final discounted figure is accepted. Accordingly, Seller agrees to authorize Buyer to prepare various negotiating offers with various prices without obtaining Seller’s signature or approval of each and every negotiating offer.
    • Seller also understands that during the short sale process the Lender will ask for bank statements and pay stubs and agrees to provide these items within 12 hours of request.
    • Buyer does not guarantee success of the short sale, and if the short sale fails, then the property will go to foreclosure.

Tip: It is strongly advised that you seek advice from a Real Estate Attorney when putting together a short sale packet.  Also, you will want to make sure that the Attorney is a litigation attorney, and willing to go to court to defend the packet in case of a lawsuit.

  • General Warranty Deed. A general warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to you. This form is given to Title Company showing that the homeowner is serious about selling property and that the investor is serious about purchasing the property.  It is in escrow pending approval.
  • Realtor Contract. Most banks require a Realtor to represent the homeowner and make every effort to sell the property during the short sale packet.  This is helpful if you are unable to negotiate a favorable selling price from the bank.  While a 10% discount in market price may not allow the investor to purchase with cash, it may allow a Realtor to sell.  And while it’s important to make a profit on transactions, some deals will result in keeping the homeowners house out of foreclosure.  And there’s nothing wrong with that occurring occasionally.


  • Hardship Letter.  This letter should be hand written by the homeowner detailing the situation they are in and why this short sale would be beneficial to them.  In order to validate this information, the bank will require basic financial information from the seller.
  • Basic financial information. The banks will generally want to see back taxes, pay stubs, bank statements, and other financial information to determine the financial situation of the homeowner.  Most banks will have a financial worksheet that they utilize to determine the homeowners financial situation.  For best results, use the banks’ forms.
  • Settlement Statement.
  • Other items not required but may be helpful.  Many banks discard offers that they feel are ridiculously low. However, how is a bank to determine what is ridiculously low and what isn’t?  To assist them in this decision, I recommend having a licensed contractor provide you with estimates of repairs and providing a copy of aComparative Market Analysis (CMAReport.  Sending in these two items will allow a bank to see how you created your offer price, and should allow you to get your foot in the door with the Loss Mitigation Team of the bank.

Tip: Short Sale Packets that are put together in a well organized manner and look professional will get through to more Loss Mitigation Departments than disorganized packets.  Helpful tips to improve your chances:  type as much information into the contract as possible, have a page number on each page of the packet, and have the name of seller, address of property, and loan number on the top of every page of the packet.

After the paperwork is filled out, the homeowner isn’t required to do any more work until the actual closing.  The investor will perform all the functions of the remaining process.