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3 Must Have Qualifications for a Short Sale short sale are many, the reality is actually very simple. Following is an explanation of the three major items that banks will be looking for to consider a seller for a short sale. While there will be much more information required, this is an excellent place to start. A seller who does not meet all three of these thresholds will not qualify. 1. Financial Hardship First and foremost a lender will want to see that your client is experiencing a ‘financial hardship’. A financial hardship is a verifiableissue that has caused your client to miss payments or have financial difficulties. Financial hardships can be issues such as: Mortgage Payment Adjustment Job Loss Too Much Debt Business Failure A simple definition for ‘financial hardship’ is: A material change in-between the day the mortgage was signed and today that has affected the borrower’s ability to pay. 2. Monthly Shortfall Almost every lender will want to see that a potential short sale client cannot afford to pay their mortgage. The way that this is demonstrated is on a financial worksheet that is essentially a monthly profit and loss statement. While this may sound difficult in reality determining whether a client has a monthly shortfall or not is actually relatively easy. The equation is: Total Monthly Income – Total Monthly Expense = Monthly Shortfall If your client does not have a monthly short fall but will have one soon due to a payment increase or pending layoff, etc. then they still can qualify for a short sale as long as this issue is verifiable. 3. Insolvency In order to qualify for a short sale, your client cannot have the means to pay down his mortgage. This means that the mortgage company wants to see that your client owes more than he has in cash (know as being insolvent). Your client does not however have to be completely broke-this is a common misconception, the lender will want to see that over time the borrower will not be able to pay their obligation. |