Thinking of doing a short sale? Then you better have one of these…

“My house is not worth what I bought it for years ago and I want to do a short sale”. Often I hear this by potential home sellers that they would like to get out from underneath their mortgage and in return, start with a clean slate and take advantage of this market and purchase a new home. Just like me and many of you reading this, we purchased our homes for much more than what it is worth today. So if you’re asking yourself, do I qualify for a short sale, then you need to know there is a two-step process the bank’s  use to determine this. 
The first step is the seller must satisfactorily prove they are in a hardship and for some necessary reason can’t keep the property.  It may be a financial hardship, or medical, or job transfer, etc. but it must be some reason keeping the house is not an option, and that you NEED to sell.  You must also be able to prove this position to them.  Even if it’s a rental and you just can’t rent it for enough money to cover your costs, the bank will be looking to see if you are financially sound enough to make up difference.  If you’re not, that can be a hardship as well, but if you are financially sound enough to cover the difference they will not allow the short sale.  Whatever the situation, there must be a reason you need to sell, it can’t just be that you’re underwater and want the bank to cover your loss. 
Then the next step is once you’ve proven a hardship, then they look to the actual offer and other loss share arrangements based on your financial ability to contribute.  They never just look at the offer and weigh it against what they think they will get if they foreclose.  The short sale is worked as an option to help out homeowners in need, not as a strategy to minimize bank losses.  They fear that permitting short sales for people who don’t absolutely need them would open the floodgates for the millions of underwater homes that people are still paying on.
So before you take anymore steps in the direction of a short sale, it’s important to know if you are able to prove a true hardship.


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