Seattle Real Estate Blog by David Monroe

Do You Qualify For A Short Sale?

Man chained to houseDo you qualify for a short sale? You may have determined that you wouldn’t be able to sell your house for a high enough price to pay off the existing mortgage(s), and you’re now considering a short sale. You may be in foreclosure or just one or two payments behind, or maybe you’re current on your mortgage but unable to continue making the payments. You know you will not be able to stay in the home and you need to get out from under the debt.

First, make sure you know all of your options for avoiding foreclosure. I recommend downloading the special report, 8 Ways to Avoid or Stop Foreclosure, if you haven’t reviewed all of your options.

Doing a short sale will take some work and cooperation on your part, even if you use a professional to assist you.  However, the benefits of a successful short sale compared to foreclosure are significant enough that it should be well worth the effort.

Here are some questions to ask yourself (and be honest):

  1. Do you have a legitimate hardship that prevents you (or will soon prevent you) from being able to pay your mortgage? Valid hardships include out-of-area job relocation, job loss, pay cut or other income reduction, divorce, significant home repairs needed that you can’t afford, and sudden increase in monthly expenses. There are other acceptable hardships as well, but you will need to be able to demonstrate to the bank that you cannot afford the house.
  2. Is your hardship short-term or long-term? If your hardship is short-term (maybe you lost your job, but you were able to regain similar employment a few months later), the bank may require that you attempt a loan modification or other workout plan first.
  3. Can you produce two months of bank statements, two years of tax returns, two months of pay stubs, a personal financial statement (a list of what you own, what you owe, your income and expenses), and write a hardship letter when you put your house on the market? This could take a couple hours or more depending on how organized you are.
  4. Are you willing to review and accept a reasonable offer on your property within 24-48 hours of receiving it?
  5. If you’re still occupying the house, are you willing to allow the property to be shown at all reasonable times?
  6. Are you willing to do some basic things to help your house sell, like clean the house, de-clutter, and clean up the yard? If a buyer expects a significant discount just because the house is a mess, the bank may think they can better mitigate their losses by foreclosing, cleaning up the property, and selling it at a higher price as a bank-owned property.
  7. Have you filed bankruptcy? If so, you’ll need to ask your bankruptcy attorney if it would be helpful sell the house in a short sale.

If your hardship is caused by you moving out of the area, the bank usually will not consider it a hardship until after you have moved. If you’re being relocated in two months, the bank may not look at your situation as being a hardship now.


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Authored by David Monroe, Realtor and Pre-Foreclosure and Short Sale Specialist.
Access Seattle area short sale help and foreclosure resources including selling in foreclosure, and 8 Ways to Avoid or Stop Foreclosure.

Copyright (c) 2009 by David Monroe (Home4Investment Team at Keller Williams Seattle Metro West).
Do You Qualify For A Short Sale?

Comment balloon 2 commentsDavid Monroe • November 03 2009 06:40PM

Comments

Lots of good ideas to get sellers started on understanding the process.  Thanks for the post.

Posted by Nancy McNamee (Keller Williams Realty) about 9 years ago

David

Just met a couple thinking of selling their home. They haven't missed a payment, they pay off their bills. The wife is making good money. The husband is unemployed. They are expecting their second child. And they may need to move out of state to care for the wife's ailing mother. And market value of their property has declined. For them to try to sell it as a regular sale, it will mean $100K out of their pocket.

They tried to talk with their lender regarding loan modification or short sale --- but they said no one wanted to spend time talking with them because they're current on their payments. That IF/WHEN they are behind on their mortgage, that's the time to discuss the loan modiication/short sale process. And that the only time they will discuss the short sale is WHEN they have an offer on the table.

So this couple is contemplating MISSING their payments. They may be able to justify the hardship. And they are seriously thinking of selling as a short sale.

Posted by Pacita Dimacali, Alameda/Contra Costa Counties CA (Alain Pinel) about 9 years ago

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