Things to Know About Short Sales 

When you endeavor to complete a short sale, the lender may require numerous items from you which could include, but are not limited to, bank statements, pay stubs, W2’s, tax returns, living expense report, etc.  With these documents the bank will “paint” there view of your financial situation. 

Once the lender or its investors have been engaged in a short sale, they have the ability to track the ‘flow’ of money you receive and/or pay out.  With your social security number, the lender has access to nearly everything in your name or with your name on it.  The intent of tracking any ‘flow’ of money would be to verify whether what you are telling the lender is fairly accurate. 

No short sale can be completed without the authorization and/or approval of the lender and/or its investors.  Generally, and upon acceptance by the lender/investor, you are provided a letter that is often referred to as a Demand Letter or Approval Letter.  This letter serves as notice that the lender/investors are willing to accept a short sale, but in some instances they may seek additional terms or conditions to do so.  It is at this time that you (the Seller) are presented the opportunity to either, accept, reject, or in some cases counter any additional terms presented. The sale is never complete, nor will it close without your approval.  If you do not agree with the terms and conditions put forth by the lender or its investors, and the parties have not come to terms on any counter proposal(s) presented, the lender still retains the right to foreclose should they chose to do so.  

With regards to the above paragraph, and why one might want to counter the lenders terms and conditions or review them with legal counsel, is that the lender may only be offering full release of the Lien (Mortgage).  What does that mean?   

When you purchased your home you executed three specific documents; the DEED, the MORTGAGE and the NOTE.   

The DEED is your legal interest in the property. 

The MORTGAGE is a legal interest in a property by a lender which you granted to them by accepting their money.  The property has become security for the debt (collateral). 

The NOTE or Promissory Note, is your promise to pay the lender back what you borrowed, similar to an IOU but with a promise to pay.  This is the most significant instrument involved in any short sale because lenders, especially 2^nd mortgage holders, can come back after you for any deficient amounts.