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The lender will also generally require a BPO as part of a short sale proposal.

A BPO (Broker’s Price Opinion) is a document prepared by a real estate professional which provides his or her estimate of a reasonable estimated selling price of a particular property.

The BPO typically contains the value of comps in the area, neighborhood condition, and the condition of the subject property compared to others in the surrounding area.

If you’re working with a broker, he may supply the document. Frequently, however, it’s the lender that orders the BPO using one of its local affiliated professionals.

You may want to be present when the broker is conduction his on-site appraisal to point out areas of significant damage, etc. The lower the BPO, the better for you the buyer

Proof of Assets

This is all documentation including balance sheets, proof of income, and all other debts and liabilities or other financial information proving that the borrower cannot repay the loan.

Documentation often includes bank statements, credit card statements, insurance policies, student loans, copies of paychecks, or other records of income like unemployment or disability checks, tax returns, credit reports, medical bills, utility bills, household expenses, etc.

It is best to be truthful and honest about the seller’s financial situation and disclose all assets.

This letter describes the specifics of the owner’s inability to cure the default and inability to sell the property at a price that will cover the default amount.

When it comes to the hardship letter, the sadder the letter, the better. The letter is a statement of facts describing how the seller got into a financial bind and pleads with the lender to accept less than the full payment amount of the debt owed.

Proving that the seller is experiencing extreme hardship and cannot make loan payments is the main focus of the letter. If conditions are that bad, it wouldn’t hurt to include bankruptcy in the plea.

The Purchase Agreement of Sales Contact

The lender will require a properly executed sales contract between you and the seller. The purchase contract must state that the sale is based on the lender’s approval. The lender will also want a copy of the listing agreement. The agreement should indicate that the buyer pays all costs associated with the transaction. The agreement should also show that the seller receives no money. More specifically, that the net amount to the seller is the same as the short-sale payoff figure to the lender.

When first making contact with the lender, request a copy of the short-sale application. Include the completed forms in this package.

You will need to prepare a short-sale proposal to submit to the lender. Your proposal should be neat in appearance and prepared like a professional document.

Start with a cover sheet addressed to your contact at the lender’s loss mitigation department. Add an overview and reason for the proposal.

State that you offer is contingent upon the lender’s acceptance. Request a time frame for response, after which you may withdraw your offer. You want to motivate the lender to respond.

Next, include an outline or index of the documents included in the package. Some on those elements should include.

The Authorization to Release Information

The Authorization Letter

Send that contact person an “Authorization to Release Information” letter signed by the seller, allowing the lender to talk with you about the seller’s mortgage. The letter should include the seller’s name, property address, loan balance, your name, and you contact information

The lender plays an active and important role in a short sale transaction, so it’s unavoidable that you will need to deal with lenders if you pursue these deals.

The more prepared you are and the more professionally you behave, the better your chances of successful dealing with lenders.

Check the feasibility of a short-sale approach before getting too involved. Short-sale investing occurs in the preforeclosure phase but not all preforclosure opportunities are short-sale opportunities.

David M. Petrovich, “The Short Sale Pro,” lays out the six basic steps to short sale success in his book, Short Sale an Ethical Approach:

1. Conduct a preliminary prequalification of the seller, the mortgage, and the real estate to demonstrate that it makes financial sense for the mortgagor and mortgage to agree that a short sale is in their best interest.

2. Gather information (field and empirical) for analysis and its manufacture into supportive data.

3. Prepare a compelling benefits-driver proposal.