Qualifying for a Short Sale

Questions? Speak with a specialist

Although short sales are becoming more and more common, not everyone qualifies. Short sales are not where you should look to by default if you’re having trouble selling your home. You have to meet a very specific set of requirements if you want to let go of your home for less than you owe the banks. Here’s how to know if you qualify for a short sale:

1. You Are Upside Down

If you don’t owe the bank more than the housing property is worth, then you’re not getting a short sale. To determine this, you’ll need to get data on what other comparable homes have sold for. If other comparable homes have sold for $120,000 and you owe the bank $150,000 – then you’re upside down.

2. You’ve Missed Payments and You’re in Danger of Foreclosure

If you’ve been making all your payments on time, the banks have no real incentive to listen to you when you tell them “Hey, I can’t pay anymore.” The banks will only accept a short sale when they believe they have no other option and that the short sale will actually save them money.

So, if you’ve been paying all your bills on time so far, chances are you won’t get a short sale. If on the other hand you’ve been late or missing payments and you’re in danger of defaulting on your mortgage, then the banks are much more likely to listen.

3. You’ve Fallen on Financial Hardship

Perhaps you’ve lost your job. Maybe there’s been a death in the family that’s significantly impacted the cash flow of the household. In order to qualify for a short sale, you have to show that you’ve fallen on financial hardship. Common reasons are: Job loss, unexpected medical expenses, divorce and death in the family.

To prove this, you’ll need to write to your lender and Letter of Financial Hardship, giving them a detailed account of what happened, your financial situation and why they should approve your short sale. Keep in mind that short sales are not given to people who can pay but don’t want to. If a seller tries to use a short sale to get out of an upside down house, or if a seller wants to get a short sale so they can lower the price of a home that isn’t selling (but they can afford to pay for,) the chances are the bank will come back with a “no.”

Do You Qualify?

If you have a home that’s upside down, you’re in danger of foreclosure and you’ve fallen on financial hardship, then you’ll usually qualify for a short sale. The only question that remains is: Will the bank lose less money by allowing you to short sale, or will they lose less money by going to foreclosure?

This is usually decided on a case by case basis – It depends on how much you owe, what they think the bank is worth and many other factors. If you meet the three qualifications above, the best next step would be to talk to a short sale expert to see how you can move forward in the short sale process.

Call one of our short sale experts at (480) 331-2832.