Listing a distressed property requires additional steps beyond a standard listing: verifying the loan balance and servicer, obtaining third-party authorization, reviewing title for subordinate liens, completing the short sale package before listing, setting buyer expectations about timeline, and preparing the seller for a process that may take 60 to 180 days. Missing any step can derail the transaction after a buyer is under contract.
Pre-listing due diligence checklist
Loan and servicer verification
- Obtain the most recent mortgage statement(s) identifying servicer name, loan number, and current balance
- Identify whether there are multiple loans (first, second, HELOC)
- Determine the investor behind the servicer (Fannie Mae, Freddie Mac, FHA, VA, or private)
- Verify current default status: number of payments missed, any notice of default filed
- Confirm whether foreclosure proceedings have been initiated and the current timeline
Title review
- Order a preliminary title report to identify all recorded liens
- Identify any subordinate liens: second mortgages, HELOCs, HOA liens, tax liens, judgment liens
- Confirm whether any lien holders will need to approve the short sale separately
- Identify any title issues that could prevent closing
Hardship documentation
- Obtain the homeowner's hardship letter (review for accuracy and completeness)
- Collect 2 months of bank statements for all accounts
- Collect 2 most recent pay stubs or documentation of income/unemployment
- Collect 2 years of federal tax returns
- Collect any supporting documentation for the hardship event
Servicer setup
- Have the homeowner execute a Third Party Authorization form
- Submit the Third Party Authorization to the servicer before listing
- Obtain the servicer's short sale package checklist and requirements
- Verify the servicer's current submission portal or contact
Property assessment
- Tour the property and document all condition issues affecting value
- Determine whether utilities are active for showings and inspection
- Assess security issues: vacancy, HOA compliance, winterization
- Document any code violations or permits required
- Prepare a CMA using distressed-property-appropriate comps
Listing and marketing checklist
- Price based on the servicer's likely BPO outcome — not just traditional comps
- Include short sale disclosure language in the MLS listing (required in most states)
- Set an offer deadline to generate competitive offers if market supports it
- Prepare buyers for the timeline: explain that bank approval adds 60 to 180 days
- Include short sale addenda in the purchase agreement addressing contingencies and timeline
Offer and ongoing management checklist
- Review each offer for net proceeds to the seller
- Submit the complete short sale package to the servicer within 72 hours of accepting an offer
- Confirm receipt of the package submission in writing
- Follow up with the servicer weekly
- Update the seller weekly even when there is no news
- Monitor the foreclosure timeline — know when any auction date is scheduled
- Respond to servicer requests for additional information within 48 hours
Pre-closing checklist
- Review the approval letter for: expiration date, required terms, closing deadline, deficiency waiver language
- Confirm buyer financing is still in place
- Schedule closing within the approval window
- Coordinate with title on subordinate lien payoffs and releases
- Confirm seller has arranged post-closing relocation