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A short sale happens with a mortgage lender who holds your loan agrees to accept the short amount of the sale as payment in full. Not every lender will accept a short sale even if you meet all of the requirements for one. The bank will make their decision based on what makes the most sense for the bank. If the short sale will save them money on the foreclosure they are likely to accept the short sale. On the other hand, if the terms of the short sale are not that good, the bank may decide to foreclose on your home instead.
Not every home qualifies for a short sale. In order to take advantage
of the short sale to avoid bankruptcy you have to meet these
qualifications:
1 - Your home has to have suffered a market value drop. This market
drop must be a result of falling comparable sale prices in your area. It
also must reduce the value of your home too less than your current
loan balance.
2 - Your Mortgage must be in or near default status. You must be in
one of the three stages of foreclosure, or you must be able to
demonstrate to the bank that you soon will be under your current
circumstances.
3 – The cause of your situation must be the result of your having fallen
upon hard times. Losing your income, divorce, and medical
emergencies are examples of falling on hard times. Simply spending
your money unwisely does not count. Things like pregnancy or lifestyle
changes also do not qualify as hardships for a short sale. You will have
to submit a hardship letter to the mortgage lender explaining your
circumstances and the reasons you have or soon will cease to make
your monthly mortgage payments and why you cannot pay the
deficiency when the home sells.
4 – You must not have assets. You will have to produce tax returns,
financial statements, and other legal documents to demonstrate that
you have no assets that can be used to make up the deficiency. If you
do have assets the lender may discount the deficiency to allow you to
pay a portion of it, or they may deny the short sale request.
Once these requirements are met, you must still find a realtor to sell
the home on a short sale, a buyer to buy the home, and the lender will
have to approve the buyer's offer. If any of these conditions are not
met, you will not qualify for a real estate short sale. You may still be
able to avoid foreclosure through refinancing or a loan modification.
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