HUD / FHA SHORT SALE NEGOTIATION for Massachusetts, New Hampshire and Maine Homeowners

HUD / FHA SHORT SALE NEGOTIATION for Massachusetts, New Hampshire and Maine Homeowners

Short sale negotiation in Massachusetts, New Hampshire and Maine is tricky.  Very few files are what I’d consider “easy” – These days, we see, traditional short sales, HAFA short sales, Coop short sales, reverse mortgage short sales, based on GSE guidelines, non-gse guidelines, portfolio loans, credit unions and it can be confusing even for the most experienced of us.

When you are negotiating a FHA short sale however, there are EXTREMELY specific guidelines you must follow as a negotiator and listing agent.

Most homeowners will know if they have a FHA loan, however you will run into the homeowner that may not know or remember.  The easiest way to find out if the loan in HUD backed is to pull the mortgage from the registry of deeds.  In the upper right corner in a box you will see the FHA number in a small rectangular box.  WRITE THAT NUMBER DOWN as it should be on every page of your short sale packet.  I put that number on the upper right corner of my pages, as a header, clearly marked.

You can list the property, but what most agents aren’t aware of is the homeowner will be “qualified” for the short sale.  If the homeowner doesn’t qualify, you cannot sell the property.  When you list it, make certain that you disclose this information to any buyers.  Let them know you are waiting for the ATP (approval to participate) from HUD.

Next you will need to collect a variety of paperwork from the homeowner and submit it to their servicer. The following paperwork is required to submit before you even have an offer.  If you have an offer, submit everything immediately, but keep in mind the homeowner may not be approved to participate in the program.  If the homeowner gets an offer without listing the property, THIS IS ALLOWED.

  • Homeowner Financials: get every page of their printed bank statements for the last 30 days.  You will also need to get 30 days of pay stubs, and their most recent two years of tax returns.  Make sure you get every page of these documents and even if there are no financial figures on a particular page, you will still need to submit it.  If the homeowner collects unemployment, you will likely need the benefit letter that explains the weekly amount they will receive and for how many weeks.  If the homeowner is unemployed and does not collect unemployment have them write a letter very specifically, where their income is coming from.  If they are disabled, the same goes for SSI.  Have them find the SSI benefit letter that outlines how much they are going to receive and send that in.
  • Hardship letter: This should be extremely specific.  When did the hardship start? How long do they anticipate being in this position? Give details if there has been income loss, death, divorce, etc.  Keep in mind moving for a job, MAY NO T qualify for approval.  If a homeowner moved to take a better job, that MAY not qualify for homeowner approval.  They most likely will have had to move because the old employer cut their pay or they were terminated.
  • Occupancy: Keep in mind the home MUST be owner occupied.  Any homeowner that does move out of their home for a employment hardship must write a letter showing when they moved, explaining if the home has tenants, when the tenants were put in place, provide the lease agreements, and explain clearly when this all took place.  If the homeowners occupy the home, they just need to write a statement explaining that and date it.

If the homeowner is allowed to short sale their property they will receive an ATP form.  (form 94005) This form will tell the list agent EXACTLY what the property can be listed for and what the minimum NET allowed HUD will accept.  This number changes with the length of time the home is on the market.

Listing Agreement: You will get a 6% commission.  Do not ask for more.  This is a HUD-1 guideline  Your listing agreement must contain this exact verbiage” Seller may cancel this Agreement prior to the ending date of the listing period without advance notice to the Broker, and without payment of a commission or any other consideration if the property is conveyed to the mortgage insurer or the mortgage holder.  The sale completion is subject to approval by the mortgagee.” If the property was not listed the property MUST be listed AFTER the approval to participate is issued and within 7 days.


– The property MUST be kept up.  This is a program requirement.
– The ATP must be returned within 7 days after the Mortgage company sends it or the homeowner may
be disqualified.
–  You will still work through the homeowner’s servicer for the short sale and ATP.  They will correspond
with HUD.  Some servicers are starting to use Equator for FHA short sales.
–  The homeowner will receive between $750-$1000 for selling their home between 90-120 days
–  Junior liens can only receive up to $2500 for release.  If settlement is after 90 days this figure drops to
$2250. Homeowners may need to give up their incentive to release junior liens
–  Buyer cannot get closing costs covered, UNLESS the buyer is an FHA approved buyer and then 1% will
be given
–  The homeowner must be at least 31 days in default for the short sale to be considered
–  If the NET proceeds and list price stated on the ATP exceed what you truly value the property at you
can apply for a value variance (there are very specific guidelines to do this)

1. You must provide the full MLS data sheets in a clearly legible PDF format on 3 to 6 closed sales that closed prior to the effective date of the appraisal being disputed and were not already used in the disputed valuation
2. These closed sales must be more comparable to the subject than those used in the disputed valuation (i.e. more physically comparable in size, features, age, etc.), geographically close (from within the subject’s subdivision if possible) and closed no more than 6 months prior to the effective date of the disputed valuation.
3. If the dispute of value is based on repairs, then you need an estimate of repair prepared by a licensed contractor (they can and will verify licenses when we deem necessary).

You will have 90-120 days to sell the property for the NET price listed on the ATP – the guidelines below outline how to set up the NET requirements for the sale:

  • Net Sale Proceeds – Regardless of the property’s sale price, a mortgagee may not approve a PFS contract if the net sale proceeds fall below the minimum allowable thresholds stated herein.  HUD has established guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.
  1. For the first 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 88% of the “as-is” appraised FMV.
  1. During the next 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 86% of the “as-is” appraised FMV.
  1. For the duration of the PFS marketing period, mortgagees may only approve offers that will result in minimum net sale proceeds of 84% of the “as-is” appraised FMV.
  1. Mortgagees have the discretion to deny or delay sales where an offer may meet or exceed the 84%, if it is presumed that continued marketing would likely produce a higher sale amount.  However, the mortgagee is still limited to 4 to 6 months after the date of the mortgagor’s approval to participate in the PFS Program.

There are full program requirements on the HUD website here – HUD short sales in New Hampshire, Massachusetts or New Hampshire are doable, but it’s extremely important that you follow the strict guidelines HUD produces, and of course as always if you need assistance with negotiations, at no charge to you or your homeowner, you can work directly with us, and our legal affiliates!

Maryann Little, VP Mitigation
106 Main Street – Suite 4A
Stoneham, MA


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