what criteria is needed to do a short sale? Do you have to prove that you cannot make pmts.?

Asked by Connie Sellars, Pacifica, CA Mon Sep 19, 2011

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Lilo Clacher, Agent, Cape Coral, FL
Tue Sep 20, 2011
Hello Connie!
There are a number of things that could put you in financial hardship and have you considering a short sale — such as unemployment, job transfer, illness, underemployment or divorce.

• How does it work? A real estate agent lists your home at its current market value. Then a buyer places an offer that is usually much less than the amount required to pay off the loan. The seller or agent (if the seller has given written permission for the agent to do so) takes the short sale purchase agreement to the bank holding the mortgage in hopes that they’ll accept it.

• What do you need? Basic guidelines usually include a hardship letter about why you need a short sale, bank statements for the last three months, two years of tax returns and permission for your real estate agent to negotiate short sale terms with your bank.
• How should you proceed? Most accountants agree that a short sale is better for your credit score than a foreclosure. Talk to your agent and have him or her refer you to an accountant who can evaluate your situation and help you take the steps necessary to secure a good financial future.
If I can be of help please contact me at liloc@att.net
Web Reference:  http://www.LiloRealtor.com
1 vote
Sharon Tinnin, Agent, Fort Myers, FL
Tue Oct 4, 2011
Hi Connie,

I'm not sure what the laws are in California, but I know in Florida you usually have to prove a hardship and do have to make payments. And don't always believe every ad you see about being able to "Live Free for up to 2 years" or "Short Sale your home and you will owe nothing" .... That's not always true. Like some of the other Realtors have previously stated, the Lender or Lenders have up to 5 years to come after you for any deficiancy. They do NOT have to forgive the entire amount! They often do, .... but they don't have to. So, Like it's also been stated earlier, ... seek LEGAL advice.

Also go to the Federal Gov't website. http://www.MakingHomeAffordable.gov and search "Short Sales" . theres alot of useful information there as well as a FAQ section with some helpful questions and answers.
You can also call your lender and ask them what they need from you IF you were to do a Short Sale.

Have you tried to do a Mod on your Loan? Because that is usually one of the things that you have to have tried to go to your lender and ask for a loan modification first, and get into a Mod program if you can. If you would like more information or have more questions, I know I'm not in your state, but, I'd be more than happy to try to answer for you if I can. You can reach me through my website and I am a Certified Short Sale & Foreclosure Resource. Please feel free to call. If I don't know the answer, I'll find it out for you. Good Luck!
0 votes
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Tue Oct 4, 2011
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0 votes
Christina Mo…, , Fort Myers, FL
Tue Oct 4, 2011
You will need to prove a hardship. This can be explained in a hardship letter to your lender.

Also, Check out a short sale package example to see what goes into the Short Sale process.

It is very important to pick a Realtor who has experience in the short sales.

Hope this helped! Good luck to you!!

Christina Morabito
Florida Future Realty Inc.
0 votes
Terrie Leigh…, Agent, Reno, NV
Mon Sep 26, 2011
In most circumstances you will need to provide your lender proof of a hardship. This could be a lost of income, lost of work, divorce, death, relocation. Contact your lender and discuss your hardship. They will provide you with a list of documents, requirments to help you get started with the short sale process. They may ask for two months worth of bank statements, two years recent income tax statements, recent pay stubs and they often ask you to write a letter describing your hardship.
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Gerard Carney, Agent, Spring Hill, FL
Mon Sep 26, 2011
You have to do more than that I am afraid. not making payments means you qualify for foreclosure, to show you are in full financial stress will possibly get you a reprieve from the bank and a sympathetic short sale option. This means the bank has decided to less the financial blow you will get through the lose of your home..
1- it has to be your residence and not second home or investment property
2- you can not have any significant assets
3- you have to prove you are in financial trouble
4- and then and only then you have to file and hope they accept you request for short sale

Remember this, the short sale is not a complete forgiveness of your financial obligations, the bank has up to five years of the sale to come after you for remaining owed money. If however they forgive you for the rest of the money owed, then they will issue you a 1099 for that tax year. If they do so it would be considered capital gains for you and is taxable by either 15% or 25% depending on your tax bracket. You can dismiss this though if you had lived in the home for 2 of the last 5 years as an exemption. Speak to a CPA or attorney about this exemption.
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Debra B Albe…, Agent, Port St Lucie, FL
Thu Sep 22, 2011
What a GREAT question.

Actually in a short sale situation, there is more than one criteria. First the homeowner needs to be qualified to do the short sale. That goes to financial situation and Hardship. "I lost money on my house, or my house is not worth what I paid for it ... IS NOT A Hardhip! It is a pain, however does not qualify for a hardship. No hardship? No Shortsale.

Second, after the house is marketed and under contract, there is the bank approval of the sale. Because they are "Short" of getting their lein (the mortgage) paid in full at closing, they have to approve the sale.

I think this may help. It is a blog I did recently on the topic: Click the Link:

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Megan Eister, Agent, Fort Myers, FL
Thu Sep 22, 2011
That is good to know Terry! Thank you for answering. All of my short sales this year were already in default, and the last time I had a situation where the owner wanted to do a short sale that was not in default was awhile ago. We were told then they couldn't do anything if the Borrower was making payments. Again, thanks, the more information we can share the better.
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Terry McCarl…, Agent, Cape Coral, FL
Wed Sep 21, 2011
Megan - yes I have - the seller showed they had spent almost all of their savings and were going to go into default within 3 months so the lender worked with us and the short sale went thru with no late payments.
Terry McCarley - Jones & Co Realty
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Megan Eister, Agent, Fort Myers, FL
Wed Sep 21, 2011
In my experience, you have to prove you can not make payments and you have to actually not make your payment. Connie, I am going to ask a question within your question ( I hope this doesn't offend you or anyone in the forum, but I am rather curious)

"Has anyone had a short sale close where the owner continued to make payments?"
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Tammy Hayes, Agent, Port Charlotte, FL
Wed Sep 21, 2011
Here is information on listing a Short Sale

A short sale describes the sale of a property by a financially insolvent homeowner who is facing foreclosure for less than the value of the outstanding loan. If a homeowner is interested in pursuing a short sale with their lender they will need to have the lender's consent and approval.
• Lender's consent and approval required.
• The lender accepts the sale as payment in full for the loan.
• The property owner escapes foreclosure, but receives no funds from the sale
• There can be no equity in the property
• Seller cannot bring money to the closing.
• Lender does not report foreclosure to the credit bureaus.
The lender will require various documentation. The incentive for the lender is to remove the account from their books before the loan becomes a problem. It can also cost a lender $25,000 to as much as $50,000 in order to send the property through the foreclosure process. Technical requirements for a short sale: (May differ from lender to lender)
• Owner must demonstrate hardship/financial insolvency (i.e. loss of employment, illness, divorce, catastrophic illness, death of a spouse).
• Seller must prepare a hardship letter asking lender to accept short sale.
Documentation that may be required by lender to determine if owner qualifies for a short sale.
• Listing agreement with Realtor showing the property is on the market for sale.
• Comparable market analysis which includes sales and listings
• Bank statements
• Pay stubs
• Tax returns
• Purchase/Sale Agreement
There are drawbacks to the short sale.
• A deficiency balance could be charged off which could result in negative credit bureau reporting.
• If the cancelled portion of debt exceeds a certain amount, the homeowner is required to report the forgiven amount as income on his or her tax return.
As always, any property owner should seek legal and financial advice before entering into this type of transaction.
If you would like more information on Short Sales, please contact me.
Tammy Hayes, Realtor, Green Lion Realty, 941-276-6185 tammyhayesre@gmail.com
0 votes
Karen A. Ter…, Agent, city, FL
Tue Sep 20, 2011
Hi Connie,
You've gotten a lot of good information here. In short, getting out of a mortgage is the same as getting into one. First you prove you can and then you prove you cannot.(pay that is). Proof are paystubs, a financial monthly budget, bank statements and tax returns.
Next, you have to prove you have a hardship and that can be several and all of the reasons shown here plus anything else that played a financial strain to you.
Some lenders/banks will allow you to sell short AND remain in a current status, but truthfully I can count them on 2 fingers! For the most part, you have to be at least 31 days late. Its true that the bank's will take a short sale vs a foreclosure; unless the foreclosure action already has a set "sale" date and you have no offer yet as a short sale, then the bank will have to continue on with the sale. I have had success in stopping a foreclosure sale up to the same day / morning of the sale to postpone to accept the short sale offer.
The sooner you sell it, the better it will be and less harmful to your credit in the end.
I would recommend speaking with a real estate attorney as well as your CPA for further information before you make the decisions and to advise you of your best course of action. Some assets, regardless of amounts are EXEMPT totally from the bank's ie IRA's but contact your sources to confirm Connie.
I hope you find this helpful and if you need any further info, please feel free to contact me at kterbenche@teamaubuchon.com.
You are on your way to recovery-----reaching out to ask for help is the hardest part!
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Mott Marvin…, Agent, Sunny Isles Beach, FL
Tue Sep 20, 2011

As mentioned earlier- the criteria will vary slightly from one lender to another; but basically the elements that are taken into consideration are as follows:

• Hardship
• Unemployment
• Divorce
• Medical Emergency / Sudden Illness
• Bankruptcy
• Death of a Significant Other

The lender will probably want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.

For example, if the seller has cash in a savings account, owns other real estate, stocks, bonds or even IRA accounts, the lender will most likely determine that the seller has assets. However, the lender might discount the amount the seller is required to pay back.

Follow Us Here, There and Everywhere! Living, in Miami Beach and Representing Buyers, Sellers, Landlords and Tenants. That's or story and we are sticking to it. http://bit.ly/qOdfLU
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Terry McCarl…, Agent, Cape Coral, FL
Tue Sep 20, 2011
Hi Connie,

The short answer is yes...as others have mentioned you will have to provide your lender with bank statements, check stubs, tax returns etc...and if you have the ability to make the payments the bank will not be open to a short sale. Numerous people have wanted to short sale because they are upside down in the property and just want out but the banks won't allow that.

If you can show true hardship and proof that you can't make payments or will not be able to make payments much longer then you can short sale. I handle a large number of short sales so if you have any specific questions please feel free to contact me at your convenience for a confidential consultation on your situation.

Terry McCarley, Realtor®, CDPE
Jones & Co Realty
email: leecountyrealtor@earthlink.net
cell: 239-707-4575
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Eric Hess, Agent, Cape Coral, FL
Tue Sep 20, 2011
You do have to show some hardship. BUT, it can be anything from unemployment (or under employment), divorce / separation, moving because of a job, illness...and much more....so it is a very broad list.

Eric Hess Broker
239 989 2950
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Steve Geving, Agent, Fort Myers, FL
Tue Sep 20, 2011
The simple answer to your question is yes. The bank will usually not grant a short sale unless you are going through a financial hardship and ultimately going to lose the home to foreclosure if they do not assist. Please call if you have specific questions.

Steve Geving
Jones and Co Realty
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Susan Burhoe, Agent, Matlacha, FL
Tue Sep 20, 2011
To Short Sale a property is a transaction between a Buyer and a Seller. The additional character in this scenario is the lender that has a lien on the property for an amount owed on the mortgage. They must be willing to release their lien on the Title "short" of what they are owed.

In order to do this a the Borrower (Seller) must demonstrate a hardship. The paperwork required is similar to a loan application in the reverse form.

Depending on the circumstances, the lender will release the obligation entirely. In others the lender will want full payment of the deficiency.

Again, it depends on the Borrower's circumstances.
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Marge Bennett, Agent, Fort Myers, FL
Tue Sep 20, 2011
the criteria varies somewhat from lender to lender. You do have to prove hardship, no money, had to move away, etc. You must list your home with a Realtor so that it is marketed on the MLS. When you chose a Realtor to list your home, please make sure they are experienced. look for designations, CDPE, etc.
I would be happy to talk with you and explain this in detail.
Marge Bennett, ABR, CDPE, e-PRO
RE/MAX Realty Group
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Ray And Karen…, Agent, Mount Dora, FL
Tue Sep 20, 2011
Hi Connie.

I've added a link with some helpful tips for anyone considering a short sale.

Must show a hardship. What changed in your circumstances:

These are some of the main ones:

Change in marital status
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Debra B Albe…, Agent, Port St Lucie, FL
Tue Sep 20, 2011
Great question and thank you for asking it. I did a blog about it, Just click the link:


Best of luck to you.

Debbie Albert, PA
Keller Williams Treasure Coast
0 votes
Christopher…, Agent, Tarrytown, NY
Tue Sep 20, 2011
Hi, The main thing is you have to prove a valid hardship, the bank will let you know what is acceptable and what isn't. The criteria for shortsales has lossened a bit in order to expidite the process.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
Web Reference:  http://raveis.com/chrispagli
0 votes
MarZia RiVera, Agent, Cape Coral, FL
Tue Sep 20, 2011
Hello, many people are in this position at this time just know you are not alone. This can be a long process depending on your bank and the circumstances of your original loan. Here is a site that can answer many short sale questions. http://www.SWFloridaShortSale.com regardless of where your home is most of the information covers banks procedures anywhere.

Here is what you can do to determine what is best for you and your family, first thing is to stay put the bank does not want you to leave the home vacant it is more costly to them and a liability to you. You are responsible for the home until your name is removed from the mortgage and the deed. To begin you will want to contact the bank to inquire on a short sale and your banks short sale package requirements most banks will request this information anything additional will be individual to your bank/loan:

2 years tax return all pages
2 months of most current bank statements (they may ask for this several times)
1 month of pay stubs for all parties on the mortgage (they may ask for this several times)
financial statement (a list of bills due for a month period of time, don't forget to divide what you pay yearly)
hardship letter, explain what has occurred to put you in this position

You will need to list the home with a Realtor and provide
a listing agreement
authorization to speak with the bank

The Realtor will market the home for a buyer then add to the "short sale packet"
the buyers offer contract
buyers proof of funds to purchase
the HUD

with all items the Realtor will submit to the short sale department for the bank to determine the net amount needed to accept a short sale at which point they will either accept the offer, counter or reject it. Once an approval is accepted and the terms of approval agreed the closing will proceed at which time you and your family will relocate to a new home. Prior to that relocation you will need to determine what you will be comfortable paying for rent each month then save enough for first last and security to relocate.

If anyone has any further questions on your individual needs or would like to list your home in SW Florida Cape Coral, Fort Myers, Lehigh, Bonita, Sanibel etc please contact me.

Marzia Rivera, Realtor
Carney Realty & Associates, inc
Web Reference:  http://www.2395404884.com
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Kevin Clouti…, Agent, Cape Coral, FL
Tue Sep 20, 2011
Hi Connie,

There are several things you need to do to complete a short sale. First you need to find an agent to represent you. The bank wont give you the time of day if your house is not listed.

Next you will need to have several documents, tax returns, pay stubs and bank statements along with a financial statement and a letter of hardship. I can assist you with all of this.

I have done many short sales and can give you lots of information on this.

Please feel free to call or e-mail me first to make sure that a short sale is right for you.

Kevin Cloutier, Realtor
Southern Premier Realty
Cape Coral
Web Reference:  http://www.kevincloutier.com
0 votes
Maria Gilda…, Agent, Manchester, CT
Tue Sep 20, 2011
Good Morning Connie,

If you are going to put yourself in the bank's shoes, what do you think you will be looking at to approve the mortgagor of the short sale.?

You have to prove that you are undergoing financial difficulty as you will eventually fill out an financial affidavit along the process.

First, consult your attorney and financial adviser before you consider a short sale. There are cases when you might end up paying for the deficiency which is the difference between your balance and the sold amount.

I am saying" might" because I am not an expert on this area. When I did a short sale, I asked my client if they knew the ramifications of a short sale and if they have consulted a lawyer before listing it.


0 votes
Sharon Tinnin, Agent, Fort Myers, FL
Mon Sep 19, 2011
Hi Connie, All I can say is that the banks are strict, and yes you do. The first thing you have to do is prove a hardship and write a letter to your financial institution explaining your situation. A short and to the point Honest letter. It's also a good idea to contact a lawyer because most of us are just Realtors and not attorneys (some of us may be both). It is a good idea to seek legal advice.
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Dave Griswol…, Agent, Bridgewater, NJ
Mon Sep 19, 2011
Hi Connie, The bank will ask you several times for such info as your bank statements, copies of your pay checks, other information such as why you can't pay it's called a hardship letter. you really need someone with experience to handle this unless you yourself do have the experience in short sales. It will drive you crazy the way they ask for the same information time and time again.

Check around if you don't already have an experienced realtor for one.

All the Best
Dave & Lisa
Web Reference:  http://www.urhomerealty.net
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