What are the Requirements for a Short Sale?

Banks do short sales for many reasons – too many properties in default, quarterly reports due, year-end reports due, you built a good case, they are worried that you might file bankruptcy and stall the process, you have several properties and the bank wants to cut its losses, and many more reasons.

What the bank requires is lots of real information to prove your case. We then gather as much information as we possibly can. These items are not required by the bank, but they will help you get a yes. The bank doesn’t usually have a specific requirement other than you prove there is an actual hardship. It is very easy to prove hardship because it is real.

• A cover letter stating why we are asking for the short sale – we would use different cover letters here – one from a homeowners point of view and a different one from an investors point of view.


• A hardship letter describing your situation with as much detail as possible and lots of proof – investors and homeowners alike need to do this step.


• Low comparable sales or other foreclosures or distressed properties in your area.


• Pictures of any disrepair your property might have.


• A net sheet showing the bank what it will make, after expenses, if it accepts the short sale. The title company doing the closing will do this for you.


• A sales contract showing that you have a buyer – if you don’t have a buyer yet, now is a good time to start looking for one.


• Some statics showing how many properties are on the market right now compared to last year.


• Have a real estate agent prepare a list of price drops in the last three months.


• A list of the registered sex offenders – this is not necessary, but has a great shock value when trying to negotiate with an out of state bank rep.


• Pictures of boarded up houses in the area.


• Pictures of new construction in the area.


• Crime reports in the county and neighborhood.


• Tax returns showing your loss of income.


• Copies of medical bills.


• Copies of any and all late bills and payments – phone, electric, credit cards, water, car payments, insurance, or anything that you can get your hands on.


• Paycheck stubs or lack thereof.


• Bank statements showing that you have no money.


• If you have any accounts that got closed, send that as well.


• If you have pawned anything to pay for bills or groceries, show the stub for that.


• If you have filed bankruptcy – show the papers.


• If you are going through a divorce, show the lawyer papers and fees.


• If you are involved in a probate situation, show whatever paperwork you have.


• Anything else you can think of that will show the bank all the reasons it should accept a discount and let the property go for less so that you can get a fresh start in life.

The more information you can provide, the more hardship you can prove, and nicer you are to the bank rep, the better your chances will be to get a deeper discount. The deeper the discount, the easier it will be for you to sell the property and get a fresh start.