What is a Short Sale?
A homeowner is "short" when the amount owed on a home is higher than current market value.
A "short sale" occurs when a negotiation is entered into with the 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.
With our current economic situation, more and more lenders are willing to consider short sales because they are much less costly to them than foreclosures. Short sales have been used successfully as one of the last options before foreclosure, and/or bankruptcy.
To qualify for a short sale the homeowners must fall into all of the following circumstances:
- Financial Hardship - You must demonstrate the reason you are having trouble affording your mortgage
- Monthly Income Shortfall - You run out of money before the end of each month . A lender will want to see that you cannot afford, or soon will not be able to afford, your mortgage
- Insolvency - The lender will need to see that you do not have enough liquified assets that could be used to pay down your mortgage