Can I short sale my house?
Qualifying to short sale your home generally boils down to 3 main challenges: 1) Getting your lender’s attention and giving your lender a reason to discount your mortgage loan 2) Demonstrating that you have a legitimate financial hardship preventing you from paying your mortgage 3) Getting your lender to accept that the price your buyer is paying for your property is close enough to your bank’s independent valuation of the property.
- Banks earn profits by collecting interest payments on money they lend. However, when those payments stop, instead of making money, the bank is now losing money and as a result has an incentive to limit those losses. Banks always take notice when they don’t get their money and borrowers who miss mortgage payments force lenders to at least consider discounting their mortgage.
- Demonstrating that you have a financial hardship is critical to qualifying for a short sale. The most compelling reason for a lender to accept less than the total amount owed on a mortgage is that the borrower doesn’t have enough money to make the interest payments or to pay off the balance of the loan. As the saying goes, you can’t squeeze blood from a turnip. Even so, the borrower must prove his financial hardship to the bank’s satisfaction with supporting documents like tax returns, bank statements and pay stubs.
- The simple truth is that a property is worth what a buyer is willing to pay for it. Nevertheless, just like the bank has the final say when it comes to approving your short sale application, it also has the final say with respect to the market value of your property. Nevertheless, you can help persuade your lender that the price your buyer is paying for your property is the true current market value by documenting similar properties in your neighborhood that have recently sold for a similar price.