There is an awful lot of information out there about short sales these days, and the overabundance of advice can get confusing. Essentially, a short sale involves convincing your lender to agree to a sale of your property that will not fully cover the amount you owe on the mortgage. But it gets complicated quickly.
Short Sale Qualifications
In order to qualify for a short sale, you must meet a number of basic qualifications. They include the following:
- Seller hardship. In order to qualify for short sale, the seller (you) must prove that you have fallen on tough financial times, that you are no longer able to make even a modified mortgage payment, and that these financial circumstances are not likely to improve in the near future. These circumstances generally include things like divorce, illness, or unexpected unemployment, and must be documented in a hardship letter to the bank.
- Loss of home value. A short sale home must be worth less than the current mortgage on it.
- Mortgage in arrears. Prior to the housing crisis, lenders required a mortgage to be in default before considering a short sale, but since then they have begun to consider cases where mortgage payments are current but the home has lost value and future payments may be unlikely based on the documented hardship.
- Lack of assets. This covers the fact that the lender will not want to pay the difference between the short sale amount and the amount remaining on the mortgage, says the foreclosure attorney. If you have any demonstrable assets, they can be used to cover that difference, and the short sale will not be approved.