After reading several posts on short sale and what the bank wants and how it all works, I thought I would share with you how to present a worksheet to show just what fees and how much each are. Hoping that this might help you in your negotiations with the lender/bank. And its broken down in good fashion to share with the seller for a simplified version of all the numbers that the lender/bank will be considering.
Before you get to the point of receiving a counter back from the lender you will need to send in the required paperwork to request consideration for a short sale approval. These papers may include all or most of the following or something in addition depending on the lender.
What documentation will a lender typically require?
A Lenders will typically require a distressed borrower to furnish a variety of documents, which could include the following: (this is not guaranteed to be a complete list and it is compliments of a compilation of other posts)
- Written explanation (and proof) of the hardship the borrower is experiencing; Letter of Hardship
- Copy of the purchase contract signed by both the buyer and seller (borrower);
- Estimated net/closing statement certified by an escrow officer acceptable to the lender (HUD statement);
- Completed and signed IRS Form 4506, "Request for Copy of Tax Form;" (if you cannot provide the copy yourself) ** in consideration of time, you should try to provide this. They usually want previous two years tax returns
- Employment paycheck stubs for the past two months;
- Past three months' bank statements.
- Professional report on any repairs needed to show why deduction was made (HOT)! However, the lender will not require this information!!!
- Copy of the TDS; (Transfer Disclosure )
- Proof of the buyer's ability to purchase the property, i.e., a completed loan application, pre-approval by another lender, or evidence of cash on hand (bank statement);
- Copy of the certified escrow instructions;
- Preliminary title report;
- Completed and signed personal financial worksheet;
- Profit and loss statement (if the borrower is self-employed);
- CMA information
The most popular ones are in bold.
EXAMPLE - of a lender approved for short sale agreed upon. The lender accepted the counter #2 received from the seller. This should show how the bank figures how much they will be losing in this offer presented to them.
Details of example:
Amount owned on the mortgage: $190,000 (which is the original price of the property)
Amount for foreclosure fees etc, have long dropped from the numbers!
This example offer was for $185,000 with a $5,000 credit back to the buyer and with Seller paying 0 at close.
This is a condo with HOA dues and the property taxes were not paid.
Closing date request: 21 days after lender approval
Other requests from Seller: Request in writing that lender forgive debt not covered in this agreement and that lender does not report negative information on seller's credit history (good luck on this!) But put it in there, if it flyes you have something in writing.
***Commission asked for was 6% but the lender countered it to 5%. 5% is the highest one I have heard about and is considered the standard, but it is wise to ask for 6% at the offset. (Let them think you think you are going to get the 6%).
In this example, both liens were owned by the same lender (makes it so much easier) if separate, then you would need to do a workout like this one for both lenders.
Approval Work Sheet between lender and Seller
| | | | |
| Buyers origin Offer | Bank Counter #1 Offer | Seller Counter #2 offer | |
Sales Price | 185,000.00 | 185,000.00 | 185,000.00 | |
Commission - *** | 11,100.00 | 9,250.00 | 9,250.00 | |
Title charges | 1,059.00 | 1,059.00 | 1,097.00 | |
HOA Prorations | -104.00 | -104.00 | | |
Sellers closing costs | 5,000.00 | 5,000.00 | 5,000.00 | |
County Taxes | 257.59 | 257.59 | 257.59 | |
1st lien payoff | 0.00 | 0.00 | 0.00 | |
2nd lien payoff | 37,785.00 | 1,000.00 | 1,000.00 | |
HOA Due/Property/transfer | 457.00 | 457.00 | 457.00 | |
Termite/Repairs | 430.00 | 430.00 | 430.00 | |
RE Taxes through 4/30/07 | | | 1,691.00 | |
Home Warranty - 1 yr | | | 355.00 | |
Escrow fees (seller portion 1/2) | | | 349.50 | |
County Transfer Taxes (seller/1.10 per 1,000) | | | 446.49 | |
Natural Hazard Report | | | 99.99 | |
| | | | |
Total closing Costs | 56,298.09 | 17,663.09 | 20,433.57 | |
Money from Seller at closing | 0.00 | 0.00 | 0.00 | |
Sale Proceeds | 126,701.91 | 167,336.91 | 164,566.43 | |
| | | | |
Side note from Customer | 0.00 | 0.00 | | |
Once this comes back signed, the lender will send you other papers that are sent to escrow (these are the instructions on how to pay the proceeds and to verify the closing date).
From this point, its business as usual as far as escrow closing goes.
Hope this helps and I welcome your comments. Please bookmark for future reference.
Rosemary
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The city boasts the second most expensive median single-family home price in the U.S., according to NAR fourth quarter 2006 figures. At $733,400, it only was topped by another California city, San Jose, at $760,000, and followed by yet another California market, Orange County (Anaheim/Santa Ana/Irvine), at $690,700. Ingo Winzer expects prices to be flat or lower in the next few years.
