How to Qualify for a Short Sale
When faced with losing your home to foreclosure, you will surely start considering options to stop the bank from re-possessing your home. Your search for a way to stop foreclosure may lead you to the short sale option. With the growing foreclosure crisis in the United States, the option to do a short sale has become a favorite. If you are unfamiliar with a short sale, here are some of the requirements you must meet in order to qualify.
- Your home’s current market value should be less than the outstanding mortgage balance. This balance usually includes penalties and other fees. To be sure, you can have your home appraised and your total unpaid mortgage balance calculated. For example, if your home was appraised to worth $90,000 and you owe a total mortgage balance of $100,000, then you are having met the first requirement.
- To qualify for a short sale, you must be in mortgage default. This means you have missed mortgage payments and received a Notice of Default, formally informing you. If not, your lender will not consider a short sale agreement.
- You will have to prove that you are having long term financial difficulties and not capable of paying the difference once the sale is completed. In most cases, reasons of unemployment, divorce, bankruptcy, medical emergency and death are considered to be valid.
- Lastly, you should have no assets that can be used to pay the lender the difference. Your lender will probably ask for your financial statement, income tax returns and other financial documents to support your claim.
If all these requirements are met, your lender will have to agree on a short sale. You must understand that sellers and lenders do not stand to gain any profit from this transaction. In many cases, the short sale is completed during the pre-foreclosure stage in order for the lender to avoid incurring further foreclosure costs. A buyer, usually a third party, will have to make a purchase offer that is less than the amount of the mortgage debt owed on the property. Some sellers enter into listings agreement in order to find more potential buyers before the reinstatement period is over.