Can I do a short sale if I don't have a hardship?

Asked by Cathy, Montclair, CA Fri Sep 16, 2011

I have two homes and I have never been late in payments. My second home is a rental and want to get rid of it but I would be owing so much to the bank and the house is not worth what I borrowed on it. Can I do a short sale? What are my options? Will my primary residence be in Jeopardy? Thank you.

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Laura Coffey, Agent, Santa Clarita, CA
Sat Sep 17, 2011
It is understandable to have questions when coping with a new and challenging situation, especially when a home is at stake. The reality is that millions of homeowners across the country are finding out that they have more questions than answers. We hope that the following information will help you better understand the circumstances.
Do I qualify for a short sale?
The qualifications for a short sale include any or all of the following:

Financial Hardship - There is a situation causing you to have trouble affording your mortgage.
Monthly Income Shortfall - In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
Insolvency - The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
What is a mortgage modification?

A mortgage modification is a process through which your mortgage lender changes any or all of the following:

Your interest rate
Your principal balance (through a reduction)
Your loan terms (example: from an adjustable to a fixed rate)
This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.

Why would a lender modify my mortgage?

Lenders have realized that in some cases it is better for them to work with current borrowers to lower payments or possibly improve terms in order to keep homeowners in their properties. The average foreclosure can cost a lender from 35-50% of the value of a property, so keeping borrowers in their homes is a good option for everyone.

What do I need to qualify for a mortgage modification?

According to the Making Home Affordable Web site http://(, you will need the following information for your lender to consider a modification:

Information about your first mortgage, such as your monthly mortgage statement
Information about any second mortgage or home equity line of credit on the house
Account balances and minimum monthly payments due on all of your credit cards
Account balances and monthly payments on all your other debts such as student loans and car loans
Your most recent income tax return
Information about your savings and other assets
Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources
If applicable, it may also be helpful to have a letter describing any circumstances that caused your income to reduce or expenses to increase (job loss, divorce, illness, etc.)

How do I qualify for a mortgage modification?

The first call you make should be to your lender, have the information above ready to discuss with them and call your customer service line to ask them what options you have available. If the person you speak with does not understand what you are asking, you can ask to be referred to one of the following departments (different lenders have different names for these departments):

Loss Mitigation
Mortgage Modification
Prior to contacting your mortgage lender you can quickly complete an eligibility test at This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability and Stability Program (HASP). For a list of mortgage lenders and servicers, visit

What if I don't qualify for a mortgage modification, can't afford my home, and owe more than it's worth?

You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not work with you to reduce your payment, you may want to consider a short sale. Agents like me, with the Certified Distressed Property Expert® Designation, have undergone extensive training in how to process and negotiate short sales. A short sale allows you to sell your home for less than what you owe and avoid foreclosure. Speak to your market expert to see if you may qualify.

What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often lower your payments.

What are the qualifications for a Home Affordable Refinance?

According to the resources released by the government, following are a list of qualifications:

You are the owner occupant of a one- to four-unit home
The loan on your property is owned or securitized by Fannie Mae or Freddie Mac (see Useful Links)
At the time you apply, you are current on your mortgage payments (you haven't been more than 30 days late on your mortgage payment in the last 12 months, or if you have had the loan for less than 12 months, you have never missed a payment)
You believe that the amount you owe on
2 votes
Ron Thomas, Agent, Fresno, CA
Sat Sep 17, 2011
Upside ~ Down

We get a lot of questions about Homeowners being Upside-Down on their house.
I will try to cover the field on this topic:
1.) Just being Upside-Down is not sufficient reason for the Bank to do anything for you:
2.) The Bank did not create the Recession and the bank has it’s own problems.
3.) For some RELIEF, you need a dire Financial Hardship to exist; such as you lost your job, or you had a Medical Catastrophe.
4.) If you want to do a Shortsale, you will have to prove to the Bank that they must help you, now or later. Most Banks will not even talk to you if you are CURRENT; so you will have to go past the Point-of-no-Return before they will do anything.
5.) The first step would be to find a Realtor, well versed in Shortsales, who will help you.
6.) This is not as simple as it sounds; many Agents have “sworn off shortsales” because of what is involved in them.
7.) It will make a very big difference if you have ONE LOAN as opposed to having a SECOND. The chances of succeeding in your Shortsale are greatly reduced by having a SECOND loan.
8.) You will have to sit down and compose a letter to your Lender; telling them exactly why you have a hardship and what you plan to do. It is my experience that you have to do this, personally; your Realtor cannot do it, and your Attorney cannot do it for you. You should be OPEN and HONEST, don’t try to B.S: This is about the only thing in the whole process that is PERSONAL. (If you really want to be PERSONAL, do it on a lined pad in your own LEGIBLE handwriting or printing.)
9.) If successful, you now can say (in the Listing) that your Shortsale is pre-approved by your bank.
10.) Now, you can List the house with your Realtor and the MLS. Your Realtor will do a CMA, (Comparative Market Analysis) to determine the Listing Price. The Bank may order a BPO, (Broker Price Opinion) to determine the Listing Price. In many cases, you will be on your own; the Bank will not communicate with you.
11.) If you get an Offer, you will probably “rubber stamp” it and your Realtor will forward it to the Bank.
12.) There is no set time for the Bank to respond; we have heard of three weeks, and we have heard of a year or more. This is not fair, not reasonable, and in fact, it is rude and ridiculous. But it is a fact; so do not get impatient or upset with your Realtor, it is not their fault and they have no control over it. They will gently try to push it along, calling every week or two; but they understand that the person who has that file on their desk, probably has 100 to 300 other files, (they could accidently take a file and move it to the bottom of the pile; things like that have been know to happen.)
13.) You must understand that the Bank is there to make money; they are not a social service organization. It is possible that they believe that they might be able to make more money by letting the property go through Foreclosure. Or, they might believe that next year (or six months from now) the Market will be stronger and they can either COUNTER your offer, or, let it go through Foreclosure.
14.) Now, it is seven months later, and you get a Letter of Acceptance from the Bank: It will probably delineate the terms that they deem acceptable: For example; it may say that the Escrow is to be 45 days, that XYZ is going to be the Title Company, that they are not going to pay for any Inspections, that they will pay a maximum of [$750] for Schedule A(1) repairs due to Pest Inspection, and that if you are not ready to close on time, you will be charged [$50] per day for each and every day.
15.) If you are still in the game, your Buyers will do their Inspections, and set up their Loan. The Bank will order the Appraisal.
16.) Follow your Realtor’s guide and in 45 days, you will be moving.
17.) That would cover a SHORTSALE: But what about a Foreclosure; that would be a separate topic.
18.) You’re not out of the woods yet. If the Bank accepted [$100,000] less than the amount of the loan, they might come after you with a Deficiency Judgment. The list of Non-Recourse States is changing fast. Please consult an Attorney at this point; I am not equipped to answer Legal Questions. But,
19.) I will say that it looks like Deficiency Judgments are like an ice berg sitting out there, waiting for your ship to come along. If you Google “non-recourse states” you can get an idea.
20.) There are still other considerations: Are you behind on your Property Taxes, (if you have IMPOUNDS, you may be? HOA fees? Insurance?
21.) You need to do your Diligence.
2 votes
Bill Mota, , West Covina, CA
Sat Sep 17, 2011
You CAN do a "strategic" short sale if your rental property is upside-down. Depending on the lender, it may be possible to do a short sale, although your bank may want you to share in the loss in the form of either a cash contribution or a promissory note.

I have just completed two short sales on rental properties and was surprised the sellers were able to walk away with NO contribution even though both were working.

Call me - I can help
Web Reference:
1 vote
Carol Perdew, Agent, Manteca, CA
Sat Sep 17, 2011

A lender may be willing to make accommodations if a borrower finds himself or herself in a difficult financial situation, particularly if it is temporary. The key is to let the lender know up front, before the problem becomes too serious to work out with the lender. Short-sale lenders are looking for a hardship and may allow borrowers to:

oReduce the Payment
oDefer a Payment
oChange the loan terms which includes renegotiating the interest rate, monthly payment amount or maturity date, or waiving late payment charges.If payments cannot be made in a timely fashion, lenders may extend the "grace period" and work with the borrower. Lenders may even agree to delay filing a Notice of Default if, among other things, they feel they are informed about the borrower’s intentions. This may make it easier to sell the property, and may preserve the borrower's credit.

Go to for more information on short-sales.

Carol Perdew
Prudential California Realty
(209) 239-7979
DRE 985176
1 vote
Anna M Brocco, Agent, Williston Park, NY
Sat Sep 17, 2011
In order to best protect yourself, before considering a short sale, consult with an attorney who specializes in real estate; he/she can better advise...
1 vote
John Souerbry, Agent, Fairfield, CA
Sat Sep 17, 2011
Banks won't usually accept a short sale if you have the capacity to pay and have been making payments regularly. If you stop making payments, your credit score is going to be dinged significantly, even worse if you go through with a short sale. Before you consider a sale or speak with an agent, I recommend you speak with a financial planner to discuss the credit implications of a short sale and your complete financial picture. Only a qualified financial planner can advise you on whether or not it's a good idea to sell, whether through a short sale or otherwise.
1 vote
VictorAndCar…, , Upland, CA
Sat Sep 17, 2011
Hello Cathy, I can refer you to one of the most succesful short sale specialist in the market today. They have succesfully closed more than 1000 short sales with many different banks. Email us If You are interested. Thank you.
1 vote
Mainstreet R…, Agent, Rancho Cucamonga, CA
Sat Sep 17, 2011
Hello Cathy, there are many reasons why a homeowner may have to list a property for sale. Even though a hardship is definitely the most common reason to request of lenders to accept a payoff which is less than amount owed, it isn't the only one. Please feel free to email me so we can discuss all your options.
1 vote
Kim Kirkwood…, Agent, Westerville, OH
Sat Sep 17, 2011
Typically you DO have to show hardship to qualify for a short sale. Your debt to income ratio needs to be above 30-35% and you must have a reason for having to sell; lost your job or took a pay cut & now you can't afford the mortgage, have to move to another city for a job, health emergency, etc. Check with your bank and see what their requirements are.

Kim Boulter
Healthy Realty
Web Reference:
0 votes
Alain Picard, Agent, Puyallup, WA
Sat Sep 17, 2011
Usually to be elgible for a short sale you must prove a hardship and you must be behind on your payments however you should contact your lender and ask them because they are the ones who you must get permission for.
0 votes
John Arendsen, Agent, Leucadia, CA
Sat Sep 17, 2011
This is exactly why I love weekends. It's the time to sit back by the pool or on the beach with an I-Mac and a 7 hour battery with wifi and just read and learn. Thumbs up to all of you contributors to this thread. I'm enlightened! As my Dad always used to say...."You're not learning when you're talking".
0 votes
Deborah Lind…, Agent, Irvine, CA
Sat Sep 17, 2011
Hi Cathy,

I had a client in the same situation and I was able to complete a successful short sale. Every sale is unique and the banks look at it that way. I would love to discuss things with you further to determine what would be best for you.

Deborah Linden
Prudential CA. Realty
0 votes
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