What Qualifies for A Short Sale?

Short Sale:  A short Sale occurs when a home is sold for less than what is owed on the property. 

The need for this type of sale usually occurs when the borrower has suffered a significant pay cut and can no longer afford the payment.  Job loss and pay cuts often facilitate an out of town or state move as well, which will also create a need for a short sale.

Where to start: 

1. Your loan does not have to be delinquent or in default.  As a matter of fact, it is better for you to contact your lender and list your home for sale before you get behind on your payments.  The sooner you sell, the better.  Preserving your credit and future buying power is paramount!

2. Lenders prefer the property to be owner occupied, but not a requirement.

3. Your income should be such that you can no longer afford to make the payment.

4. You must be willing to provide the lender with two years tax returns, two months bank statements, two months pay stubs. These should be provided for all parties who originally signed the note. If you have gotten married since signing the note, the lender may also require your spouse's income information as well.

5. You must provide the lender with a hardship letter stating why you are requesting the short sale i.e.: poor health, salary cut, loss of job, etc.

6. You must provide the lender with a personal financial statement showing all monthly expenses.

Once you have provided the lender with this information, they will consider your request for a short sale. It's not a slam dunk. If you decide to take this path, you must know that the paperwork is endless and the lender will respond to you when they are ready. Patience is a must.  Your Shortsale will likely take six months.  In the meantime, it's best not to allow your payments to go beyond 90 days late. Loans within the 90 day limit are given preferential treatment by some lenders.

Another factor the lender will consider is how many liens are on the property, i.e.: tax lien, home owner's association lien, 2nd mortgage. If you have more than two liens, you must have a plan to satisfy ALL of the lien holders. Some lenders will NOT pay Homeowners Association fees as a part of the short sale settlement. 

Another option is a loan modification with your current lender.  If you have a higher interest rate, the lender will likely lower your rate if you have sufficient income to support the new lower payment.  Call a REALTOR who is a Short Sale Specialist to see what options might be suitable for you.