What are the Requirements of a Short Sale | How Do I Qualify
Today's question is what are the requirements of a short sale?
What are the key elements required to complete a short sale transaction. Lets start with number one.
You have to be underwater on your house. Meaning, you owe more than the house is worth. You are upside down. If you were to sell the property the net proceeds from that sale wouldn’t be sufficient to satisfy the underlying mortgage debt.
That is your first element, being under water.
You have to present some sort of a hardship. Meaning you are experiencing a set of financial circumstances that will make it exceedingly difficult to make your mortgage payment.
There is a slight caveat here. There hardship element becomes less and less relevant the closer that we get to the trustee sale date. At the point for the lender it becomes a simple math problem. They will look at the anticipated net proceeds from the short sale and they will compare that to the foreclosure price. What they think they could actually realize out of foreclosure.
More often than not the lender stands to gain more in a short sale transaction. That is why the hard ship element becomes less relevant the closer we get to the auction date.
3. Financial Review.
The lender will review the borrower finances to determine whether or not a short sale is appropriate under the circumstances. Whether or not their decision to let the borrower off the hook is warranted based on that borrower’s finances.
The other part of the financial review is the offer itself. The lender will evaluate the offer from a bona fide purchaser to determine whether or not that offer truly and accurately reflects fair market value; Whether or not it is the highest and best possible offer that lender can get.
At the conclusion of the short sale we've got to worry about the deficiency balance. How the is lender going to handle any remaining unpaid balance left on the loan. The approval letter should contain the requisite deficiency waiver language. That deficiency waiver language will ensure that the borrower is no longer on the hook for any remaining balance. They are no longer personally liable for the unpaid balance.
If you are working with a team of professional, experienced consumer debt advocates who know what they are doing you are going to increase your chances of navigating these waters successfully.