A short sale can be a solution for homeowners who need to sell and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become more negotiable when it comes to these transactions.
Here is a more official definition of a “Short Sale”:
- A homeowner is ‘short’ when the amount owed on his/her property is higher than current market value.
- A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage.
For homeowners to qualify for a short sale, lenders often look for the following circumstances:
- Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
- Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
- Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.