SHORT SALE RULE

Here is a Short Sale Rule -- well, actually a few rules, to see if you can qualify for a Short Sale with your lender. If you are contemplating doing a Short Sale, you might not qualify for a Short Sale if you cannot answer yes to the following four Short Sale Rules.

• The Market Value of Your Home Has Declined
  Your Realtor® must have a good list of comparable sales proving the market value of your home is less than what you owe and is equivalent to the list price being offered. In addition to your Realtor's® comps the lender will send their own Realtor® to put together a Broker's Price Opinion (BPO). This price opinion must be in agreement with your assessment for the lender to accept your assessment of the market value of the home.
  
  
• The Mortgage Must Be In Default
  If you are not at least 2-3 months behind in your mortgage payments, your lender will not consider your home for a Short Sale. This means that by the time you are eligible for a Short Sale, your credit will be damaged.
  
  
• You, the Seller, Have Experienced a Hardship
  In the Short Sale Package that you'll submit to your lender will be a Hardship Letter explaining the details of your hardship which has caused you to miss mortgage payments.

  Examples of hardships that can qualify you for a Short Sale are:

  
  
  • Loss of Job
    
    
  • Illness/Medical Emergency
    
    
  • Death of Spouse
    
    
  • Bankruptcy
    
    
  • Divorce
    
    
  • Resetting of Adjustable Rate Mortgage Upward
    
    
  
  
  Some examples of situations that do NOT qualify you for a Short Sale are:
  
  
  • Deciding that you don't want to be "upside-down" in the home, even if you can afford the payments. Upside-down means that you owe more than the home is worth.
    
    
  • Buying Another Home - If you've purchased another home more to your liking, you can't just abandon your present home and request a Short Sale.
    
    
  • Becoming Pregnant - Starting a family or increasing the size of your family is not considered a hardship.
    
    
  • Having Unpleasant Neighbors - Even if your neighbors throw loud parties all night, you cannot claim this as a hardship.
    
  
  
  
• Seller Has No Assets
  Your lender will definitely check to see what assets you have. If you have savings accounts, stocks, bonds, other real estate, or even IRA's, your lender will want you to pay as much of the shortfall as possible. They won't be willing to assume the entire loss.
  

Short Sale Consequences

• Even if you meet all of the above requirements for a Short Sale, if no one makes an offer and buys your home, you won't qualify for a Short Sale. Likewise, if you do receive an offer and your lender refuses to accept your buyer's offer, you will not qualify for a Short Sale
  
  
• Lower Credit Score
  By virtue of the fact that you missed a number of mortgage payments, your credit score will be hurt. The Short Sale itself will, most likely, show up on your credit report as a preforeclosure that has been redeemed.
  
  
• Income Tax Consequences
  Your lender has the right to issue an IRS 1099 form for the amount of the shorted difference. Whether or not you will be liable to pay tax on this amount is dependent upon your own individual circumstances.

If you want more information on whether you really should try to save your home you can find out here.