Consider the following to determine whether your circumstances are valid Hardship that will qualify for a short sale.
Examples of hardship are:
- Unemployment/loss of financial resources
- Medical Emergency / sudden illness
A few examples that do NOT constitute a hardship are:
- Bad purchase decisions. If you have spent all your money on toys or non-essentials this cannot qualify you for a short sale option.
- Unhappy with the neighbors. Even if every home on your block has “For Sale” signs and it seems dangerous to you this will not qualify as a hardship.
- Buying another home. Just because you now have two mortgage payments, the bank will not see this as a hardship but poor decision making.
- Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.
- Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to dump your home.
Consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all three requirements, you may not qualify for a short sale.
- The Home’s Market Value Has Dropped: Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.
- The Mortgage is in or Near Default Status: It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems as soon as possible.
- The Seller Has Fallen on Hard Times: The seller must submit a letter of hardship that explains why the seller cannot pay the difference due upon sale, including why the seller has or will stop making the monthly payments.
You will need to compose a “Hardship Letter” to the bank to discuss the situation and options. These can often be the deciding factor of the deal. A lender will really focus on the hardship letter to see how you’re really affected personally with your financial situation. Lenders aren’t swayed by sad stories and pity; they’re swayed by financial facts that make it preferable for them to approve a short sale instead of foreclosing on a property. Together we can write up a proper hardship letter to submit to your bank.