SHORT SALE REQUIREMENTS
Many homeowners today, who owe more on their home than it is worth, may be able to work out a "deal" with their lender that lets them sell the house and the reduce their loan payoff. For example if you owe $250,000 on your house but it is only worth $200,000, the bank may accept the $200,000 less your selling costs and release you of any future liability. Why would they do this? If their alternative is to foreclose on your property and end up owning it and having to sell it, their costs may be much greater than settling for a lower payoff. On average a lender will lose about 50% on a foreclosure property, compared to about 20% for the average short sale. A lot of times it is mutually beneficial for all parties.
So if you owe more on your house than it's worth do you automatically qualify for a short sale? No, there are requirements that are listed below.
- You must have an acceptable hardship, which is defined as a material change in your financial situation which will affect your ability to pay your mortgage. i.e. loss of job, business failure, death of spouse, illness, damage to property, divorce, medical bills, mandatory job relocation, military service, mortgage readjustment, other debt, etc.
- You have to be insolvent. Basically if you have cash or assets that can be used to pay down the mortgage you will be expected by the lender to do so. If you don't have that ability you may quality.
- You have missed or are about to start missing making your mortgage payments.
If you meet these qualifications then we should talk. Putting together the short sale packages for the lender is a complex process and should be started as quickly as you know you have problems.