How to Qualify for Short Sales

Qualification for a foreclosure short sales is, of course, the first consideration any homeowner should make before attempting to commence proceedings. The requirements are certainly not as simple as some may think, though can be broken down into a few fundamentals for easier understanding.

The Market Value on the Property Must Have Dropped

It is essential that the home or property in question has less value than the balance which remains owed to the lender. Pre-payment penalties may be included in this balance. The figure must be well substantiated.

The Property’s Mortgage should be of Default Status or Close to Approaching it

In the past, it was rare or almost impossible to find a lender which would consider the short sale process if payments were still current. This however has changed as more and more lenders have come to the decision that there are a myriad of other factors which can lead to a default, therefore they are much keener to nip potential future problems in the bud, so to speak.

The Property’s Seller Has Found Him/Herself in a Difficult Situation

In this circumstance the seller is required, upon sale, to provide an official document in the form of a letter detailing their particular situation, also indicating why they will or already have stopped meeting their current repayment needs. There are a number of common claims which though genuine do not substantiate this claim:

* Problems with neighbors: Regardless of the circumstances, quarrels or discontent with neighbors is never an acceptable justification.
* Pregnancy: Whether it has been a deliberate decision to increase the size of a family or an unexpected occurrence, this will not help.
* Purchase Decisions: Spending money earned on unnecessary items resulting in the inability to meet repayment will never hold water here.
* Moving Home: Lenders will not be interested if you have purchased another property regardless of the reason for this.

General examples which will help toward short sale qualification include:

* Unemployment
* Medical Problems
* Bankruptcy
* Divorce
* Death

Of course, neither list is exhaustive but serves as a good indication as to what exactly constitutes an unfavorable circumstance, at least in the eyes of a lender.

The Person Selling the Property Has No Assets

When a lender is approached, they will most likely ask the seller to produce a copy of their financial records, possibly their tax returns for inspection. Should the lender believe that a seller does indeed have some degree of assets, they will probably refuse the short term application on the grounds that the seller does indeed have the means by which to pay the amount owed. Those with assets are often accepted, though can incur considerable extra charges making the process potentially unprofitable.

If a seller meets these requirements, along with countless other provisos, some of which are written and some simply common sense, they may indeed apply for a short sale as an alternative to foreclosure. All institutions have their own specific rules, guidelines and regulations therefore a little ‘shopping around’ is always wise.