Every lender will have slightly different policies or rules about who qualifies for a short sale, but here are some guidelines that list the factors that are likely to be considered.

 

> If the borrower can prove legitimate hardship.  Remember that the categories of hardship are financial, marital or health. If you claim a hardship under one or more of those, be prepared to send in documentation to prove the hardship. Here are some of the hardship categories that might be used:

 

Unemployment      Reduced Income    Divorce or Separation        Medical Bills

Too Much Debt      Death of my Spouse   Death of a family member   Illness

Business Failure    Job Relocation     Damage to Property   Payment Increase

Military Service      Incarceration

 

> If the property is in a marketable area and in decent condition. We are still in a declining market, but some areas locally have been hit harder than others and my nor qualify for a short sale. If you’ve trashed the house or stripped it, don’t even ask.

 

> If the marketable value would result in enough proceeds to give any junior lien holders (second mortgages and lines of credit) at least 15-20% of what they are owed.  While these second lien-holders will be out of luck if the house goes to foreclosure, don’t expect them to just forgive all that you owe them, just so you can get out from under the house.

 

> If you are willing to submit a complete “package” to justify the short sale. Now is not the time to balk at having to bare your financial soul to the bank. You’re in deep trouble and you need to deal with it. Get all of the required information together and make your case for help. This is not the time to let false pride prevent you from acting to save what you can of your credit rating.

 

> If you have your multiple loans with one lender. If is much easier for the primary lender, if he doesn’t have to negotiate with 2-3 other lenders.

 

> If there is enough time. Don’t wait until the day before the Sheriff's sale to ask for a short sale. It will take the bank 2-3 weeks to wind through all of the internal procedures and committees than have to review your request. Get it in early in the foreclosure process (see Michigan Foreclosure Process for details on that).

 

 

When is is unlikely that you qualify for a short sale?

 

> When there is no hardship. You can’t just go “my bad, I can’t afford this any more”, and hope to get the bank’s approval for a short sale. Something has to have happened in your life that makes things dramatically different than when you requested the loan. Otherwise, forget it!

 

> If you have filed Chapter 7 or Chapter 13 bankruptcy. Filing bankruptcy precludes also asking for a short sale. When you involve the court, they assign a trustee and they now have say over what you may or may not do.

 

> If you had a recent refinance. If you refinanced within the last 6 months, especially if you took money out as part of the refi, you will not get a friendly ear at the bank for a short sale. After all, you have their money fresh in your pocket, so don’t expect them to forgive you now.

 

> If you won’t provide a full packet to support your request. Again, this is not the time for pride. You don’t have to grovel, but you do have to play by their rules. The failure to submit a complete package to the lender is the primary cause for being turned down for a modification or a short sale.

 

> When you are upside down on the house (you owe more than it is worth), but current on all of your other bills. The bank expects you to have made an effort to keep up with the mortgage, even if that means juggling other obligations. If the payments on the BMW and the country club are current, but the mortgage isn’t, don’t expect much sympathy.

 

> If there are liens or judgements that might

cloud the title. If you’ve got back tax issues or

mechanics liens from tradesmen or even recorded

back dues to the HOA, you will not get a short sale

go-ahead.

 

> If there is not enough time left to make a short

sale decision. Don’t wait until the eleventh  hour,

with the Sheriff at the door to ask.

 

> If your mortgage is new or recent within the last 3-6 months. Again, there are no “do-overs” allowed in this game. You signed up for the mortgage just a few months ago, so you are on the hook.

You see now why you need professionals like my short sale team working for you. This isn’t an easy and straight-forward process. You could easily blow your opportunity to use a short sale to get out from under your house, just by messing up a step or two with the banks. You need help and that’s what we’re here to provide.