Proving A Loss To The Lender

Proving A Loss To The Lender

Author: Art Lee

When submitting a short sale file, make sure to analyze the complete file and identify any items that may provide proof that it is in the lender´s best interest to be sold via a short sale. Be careful not to speak with a tone that suggests you are telling them how to look at the file and they need to listen to you as you are the expert. The lender may take offense and it may make things more difficult during negotiations.

Some lenders do not want to be bothered with extra paperwork that has been submitted with your file so if you do want to add any information to prove that a short sale is in the lender´s best interest, a good suggestion would be to compile this information onto two pages maximum. These two pages should summarize the key points of the short sale packet and the information should be organizes in categories with 12 point font to make it easy to read. For example: Net Sheet, Property Details, Home owner´s Financial Hardship, Special Circumstances, etc.

Here are some key points to include:

Page 1

• Create a Net sheet to show the property sales prices, outstanding loans, closings costs and seller´s proceeds, which is the amount of money the bank will receive. On the same sheet create a comparison that compares the proceeds if the property becomes an REO listing. The difference should be that the lender will recover more money by doing the short sale.
• Even though a Net sheet is put together to show the costs they will incur if the property goes back into their inventory, do remember to point out things such as money lost due to the costs of the foreclosure proceedings, back payments, wear and tear to the property, marketing costs to sell the property, etc. This will prove to them that the costs will be much higher if they do not agree to a short sale.

Page 2

• Note the current listings and the number of days on the market and tie that into the value of the purchase contract to show the home has been priced correctly with the market. Note that the purchase contract is lower the other homes because it is a short sale which includes additional costs (commission, closing costs, etc.)
• Mention key points of the borrower´s hardship (divorce, loss of income, etc.) and summarize how much income is brought in compared to how much goes out for expenses
• Mention that the borrower has exhausted all options and if a short sale does not work, they will be looking at bankruptcy. This works well with lenders as they know if the property goes to bankruptcy they lose their ground on recovering a higher amount of money if they did a short sale.
• If commissions have been reduced to market standards or the buyer is willing to put a few extra dollars in to make the deal happen, make sure to note this. This shows the lender that you are being cooperative and trying to come to a solution amicable to all parties.
• If there are any special circumstances related to the short sale file, note them so the lender is not caught by surprised. For example, a tax lien, lawsuits, renters in the property, etc.
• If the property has defects, do note them in the one page summary and provide a total estimate with what it would cost to get the property back to "normal" operating conditions. This information can be provided on the net sheet which shows the costs of the property being sold as an REO listing.

Even though you will spend the time to crank out these two pages, the lender still might not read it so it is important that you have a copy in front during lender calls so that you remember to mention the key points throughout the conversation. There is no hard and fast rule that a certain lender would take your summary and read it or keep it in their files. Some may decide to toss it out. It all depends on the negotiator that is assigned to your file and if the person who previously reviewed your short sale submission packet did in fact include it with the rest of the paperwork before handing it off to a negotiator. This method is completely worth your time because if it is looked at, it may be used during the decision of an approval.

WHBSolutions is the Bay Area´s full service real estate solution provider simplifying short sales / short sale