We always advocate finding a Realtor familiar with short sales. Short sale training for real estate salespeople is lacking so look for someone with experience.

Recently a lenders representative said their loss mitigation department is receiving 100 - 150 such packages a day! They are completely swamped and as a result a lot of banks are just letting properties go into foreclosure because they can't handle the short sale workload.

This should make you aware that you must do everything within your power to make this as easy a transaction for the lender as possible.

Call the lender responsible for your mortgage

You may need to make many phone calls before you find the person responsible for handling short sales. You do not want to talk to the "real estate short sale" or "work out" department, you want the supervisors name, the name of the individual capable of making a decision. Be patient different banks have different names for the short sale department.

Submit Letter of Authorization

Lenders will not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan.

The letter should include the following:

Property Address
Loan Reference Number
Your Name
The Date
Your Agents Name & Contact Information
Preliminary Net Sheet (HUD1)

This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you. If the bottom line shows cash to the seller, you will probably do not need a short sale. As a property owner you can not receive any cash proceeds from this sale.

Hardship Letter

The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or other serious difficulties. This is the place for brute honesty. Put your pride aside. You are trying to get a lender to take less for a property than you legally owe.

Proof of Income and Tax returns

It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lender are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

Copies of Bank Statements

If your bank statements deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

Comparative Market Analysis

Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a Comparative Market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes in your local area.

Purchase Agreement & Listing Agreement

When you reach an agreement to sell to a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to possibly renegotiate commissions and to refuse to allow payment of certain items such as home warranties or termite inspections.

Now if everything goes well, the lender will approve your short sale and you have made the first step to a better financial life.