Can we do a short sale if we have no hardship except that it's extremely undervalued and we put no money down into the condo?

Asked by Almc2011, San Mateo, CA Fri Jan 7, 2011

2 bedroom condo in San Mateo, We have 2 loans

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Barry Shapiro’s answer
Barry Shapiro, Agent, Camarillo, CA
Thu Aug 15, 2013
Certainly, it's worth calling your lender to ask. Your down payment contribution is not relevant to your qualifications. Plan to submit mountains of personal financial information and apply for a loan modification initially. I hope this helps!
0 votes
, ,
Wed Jan 12, 2011
Centurion, I am so glad you were able to do that. I am sure you are very proud of yourself that you are helping to contribute to the mess that this country has gotten itslef into. We have people here who bought a home with no money down, at the top of the market. They are telling us that their only hardship is feeling like jerks that they owe more for the property than it is worth. TOO BAD! This is life. It doesn't always work out the way that you want.
5 votes
Don Tepper, Agent, Burke, VA
Wed Apr 6, 2011
Maybe. Though (despite a couple of the answers below) I really haven't heard of price depreciation alone justifying a hardship.

Though I don't get it. You're including in your explanation for why you'd like to do a short sale "we put no money down into the condo." Let me make sure I understand this. You took out two mortgages. You told the lenders you'd repay the loan. The banks agreed to lend you 100%, based on your promise to repay. Now your property is worth less than you paid. And because you didn't put anything down, that somehow supports an argument for a short sale? What if you had put $10,000 or $20,000 down? How would that change the scenario? Actually, it seems to me that it'd be more of a hardship if you were in a position to lose $20,000.
4 votes
Bay_area_ll, Home Buyer, Oakland, CA
Tue Apr 12, 2011
really amazed that so many agents are admitting to doing short sales when there's no hardship involved.

and you wonder why the housing market is crashing.
3 votes
Christine Fu…, Agent, Sugar Land, TX
Wed Apr 6, 2011
Do you live there? Are you content? Has anything in life changed except that the current fair market value is different than when you purchased? Has the same thing happened to your computer? Your cell phone? Your car when you drove it off the lot? Was that a good enough reason for those vendors to take back the product?
3 votes
Slava Derugin, , Palo Alto, CA
Thu Feb 17, 2011
Hi there,

It might be possible, depending on (1) who your lenders are (some are easier to work with than others), (2) what you say to satisfy the hardship requirement, (3) what your financial documents show as far as ability to pay the mortgage.

Technically, being upside down or undervalued is NOT accepted as a hardship by lenders. And regardless of what you say in the hardship letter, they will review your tax returns, bank statements, pay stubs, and credit report. If they determine that you can afford the mortgage, then the short sale will be declined.

The fact that you have 2 lenders adds another level of complication. Quite frequently, the 2nd lien will demand more money for payoff than the 1st lien will agree to grant them out of the sales proceeds. Even if you - or in some situations, the buyer - scrape up additional funds to pay the 2nd, the 1st lien will have the right to demand that money for themselves (since they are in 1st lien position).

Like I said - possible, but may be difficult... I'd need to know more details. Before becoming a realtor, I worked as a professional Short Sale negotiator for other realtors. So feel free to call or drop me a line - I will be happy to share my experience.

Realtor, Short Sale Specialist
3 votes
Steven Ornel…, Agent, Fremont, CA
Fri Jan 7, 2011
Almc2011: Looks like you have your answer!

If you are now considering a "Strategic Default", defined as walking away from a home even though you can afford the payments, you had better weigh ALL of the options and their ramifications.

Start with this general article, "Strategic Default: Should You Do It?"…

While the article generally touches on how long you will be affected, I HIGHLY ADVISE you get your information from authoritative and comprehensive sources. To do this, you must speak with both a CPA and Tax Lawyer. Agents providing responses on Trulia, myself included, will at best scratch the surface of this issue - you need professional advice if you decide to strategically default.

One authoritative source you can reference on your own comes from the Fannie Mae Selling (read underwriting) Guide, located at

Starting on page 430, section “Significant Derogatory Credit Events — Waiting
Periods and Re-establishing Credit” covers the waiting periods before you will be able to buy again broken out by “event”.

Don’t be “penny wise” and “pound foolish” about this decision. Know exactly what your options are and the ramifications of your final decision.

Best, Steve
3 votes
Annette Law…, Agent, Palm Harbor, FL
Tue Apr 19, 2011
Almc, as you have observed from the over 155 responses, everyone is an expert on the subject and all of offered yes, no, maybe answers. In the wild, wild west of short sales, anything is possible. Quite often citizens, real estate agnets and the various parites involved are using a different lexicon when using the term 'short sale' in regards to selling real estate. Until you and I are confirmed to be using the same definations, there can be no agreement concerning your question between the two of us, but unfortuneately, therer will be dozens of others involved in this process.

What is a short sale?
1. You owe 200K on a condo, you can sell for 100k and bank says, "go ahead and sell, but bring with you $100K to the closing."
2. You owe 200K on a condo, you can sell for 100K and bank says, "Go ahead and sell, but I reserve the right to collect the $100K later most likely via a collection ageny to whom I will sell the right to collect." By the way, in FL this collection is possible for up to 17 years after the sale
3. You owe 200K on a condo, you can sell for 100K and bank says, "Go ahead and sell, but sign this promisory note that obligates you to repay the $100K
4. You own $200k on a condo, you can sell for $100K and bank says, "Go ahead and sell and I wiill forgive and relieve you of any requirement to repay the $100k. Oh, but you will be held accountable to pay the IRS for $100k in additional income. Hmmm, what to you think that IRS surprise will add up to?

In each situation the banks, morgage services and investors involved in your mortgage have their own set of fluid rules and formulas that they try to apply. They may choose to interpret their rules one way today and differnetly tomorrow. It is really the wild, wild west of real estate. Anything can happen. Yes, #4 has occured without hardship and #4 has even happened on 2nd homes. Anything can happen!

The responses offered here and by others reflect how distressing this process if for everyone. We each wish we could offer a concise..absolute response, but so much of what happens is so acutely dependant on the skillls of the agent/negotiator, the contact resources they have, and the organizations involved.
Best of luck in your sale.
2 votes
Jayne Russell, Agent, Winston Salem, NC
Sat Apr 16, 2011
You must "qualify" with your lender as a hardship case. In most circumstances, you need to miss at least a couple of your monthly payments before you can even be considered.

The short sale processs is very lengthy and complicated. Even after the sellers have convinced the lender they qualify, the property has to be appraised by someone on behalf of the lender. Then the lender determines what percentage of loss they are willing to take after receiving offers from prospective buyers.

Once a buyer makes an offer on a short sale, they can expect to wait for 2-6 months to hear if their offer is accepted. (It is further complicated if there is a second mortgage on the property.)
2 votes
Jennifer Rat…, Agent, Knoxville, TN
Fri Apr 15, 2011
I would suggest you speak with a real estate attorney that specializes in short sales and foreclosures. He or she can advise you as to what is best for your situation. That being said, being upside down on your mortgage may be cause for hardship. The attorney would advise you on what is required in your state to qualify. Usually you must provide the required documentation to have your attorney get started. These may include, but are not limited to:
-Borrower's Authorization
-Mortgage Statements
-Hardship Letter
-Paycheck Stubs, if self-employeed, a 6 mo. Loss & Profit statement
-Tax Returns
-Bank Statements for all accounts
-Financial Statement/Budget
Other information may be required as well, as varies from state to state and lender to lender.
Good Luck!
2 votes
David Jaffe, Agent, Arlington Heights, IL
Thu Apr 14, 2011
Hi Almc,

You have to prove hardship, merely having no equity and a de-valued home will not be approved with your lender. If you need to move, you might consider renting your condo.. But be sure your Condo Association allows rentals, or has a requirement for a percentage of owner occupied units.

The goal of a short sale is to avoid foreclosure on your record... your credit will be severely affected for 7-years... Try renting if you absolutely have to move.

Best of luck,

David Jaffe-SRES, CDPE
Realtor-Coldwell Banker.
2 votes
Noemi Souza, Agent, orlando, FL
Tue Apr 5, 2011
You may be able to do a short sale but your lender may ask for a cash contribution ,or for a promissory note to be signed at closing. I have had a lot of short sales with no real harship where the negotiator based his decision mostly on the hardship letter. Some lenders won't accept a short sale unless you're at least 30 days delinquent, and the short sale could affect your credit score by 50 points, so please keep that in mind; some people cannot afford to hurt their credit.

Make sure you choose a short sale company that won't charge you for their services, and please contact them for more information before you decide to go that route.

I have been working with short sales for over 4 years and I have seen it all. Feel free to contact me for more questions.

Good Luck!
Noemi Souza.
2 votes
John Walin, Agent, Libertyville, IL
Sat Apr 2, 2011
Sorry Scott, Financial advisers and attorneys are not supposed to advise you to walk away, break the law or misrepresent your financial picture, hide money or tell you to burn the place down. CDPE or SFR agents can't help you "fake" a hardship. Try to negotiate with the bank a reduced difficiency amount and bring money to close.
2 votes
Rachel LaMar,…, Agent, Carlsbad, CA
Mon Mar 28, 2011

Unfortunately if you want to short sale your condo you will have to prove that true hardship exists. The lender will require you to show your 1099's, tax records, bank statements and other information. If you have liquid assets your short sale will likely be denied and you will have to honor your obligation to your mortgage. I am not saying it is impossible to get a short sale approved in your situation, but it will definitely be more difficult.

You also want to consider that since you have a second lien that lien holder CAN come after you for the deficiency amount, even if you did get by the first and get a short sale approved. In California the statute of limitations for such an action is four years, so any time up to four years after you closed you could be liable to the second lien holder for the delinquent amount owed on that loan.

Your best bet in this situation is to try and get a loan modification. You can also try to get your property taxes reduced. If that still does not help and somewhere down the line you need to do a short sale that is warranted, make sure to work with an agent who understands short sales--you want to make sure to get an agreement from the second lien holder NOT to come after you for the delinquency.

Best of luck,

Rachel LaMar, J.D.
LaMar Real Estate, Inc.
2 votes
John Walin, Agent, Libertyville, IL
Sat Mar 26, 2011
bank is doing you a favor allowing a short sale to take place. What you want is a strategic default, and you need to understand the consequences. Figure out projected shortage and bring money to close or sign promissory note and sell the dang place. Unless you want to not buy a new car with a loan, get snubbed for credit and insurability, and employability, it affects your credit for 8 years if you go foreclosure route.
2 votes
David Cooper, Agent, Los Angeles, CA
Sat Apr 16, 2011
Almc20..It is quite evident that the experienced agents know that you have to prove hardship with documentation. Undervalued is NOT hardship. The only issue still open for debate is missing payments and seeing how the bank responds. In my experence with BofA, after missing 2 payments, a letter arrived with a
special phone number to a department that handles homeowners with missed payments. It is at this level,
after missing 2 payments, that you might be able to plead your case. But again, you will have to convince
the lender that you would rather lose the house in foreclosure than continue making payments and do a short sale.

David Cooper! Las Vegas Foreclosure Investor in Bank Owned REO's with Cash Flow +1-7024997037
not a real estate agent
1 vote
Michael Ford, Agent,
Sat Apr 16, 2011
much bad advice indeed.

it is never a good idea to miss payments if you can make them. in your case you have stated that you have no hardship. it is senseless to hammer your credit needlessly. it might help to ask yourself what your credit rating is worth to you and determining if the damage is worth it.

if you are contemplating a strategic default that's another matter that's between you and your god. lots of folks game the system in this fashion so you'll be in good company.

i cannot see how this is confusing to anyone here. when purchasing with no money down you rolled the dice...sometimes they come up 'snake-eyes'. if you can pay your bills, you should.
1 vote
Rhona Peters…, , Syosset, NY
Thu Apr 14, 2011
No! I am looking at the other answers & don't understand them. I don't know if it is different in other states, but here in NY there are basically 2 criteria for a short sale and one of them is that the homeowner must have and document a financial hardship. The other is that the market value of the home is less than the balance of the loan.
1 vote
Dp2, , Virginia
Wed Apr 13, 2011
Frankly, I'm surprised to see people still recommending others to miss a few payments to qualify for a short-sale in light of MARS.

Almc2011, although you might be able to do a short-sale, your mileage may vary. Keep in mind that even in cases where the borrow is a few payments behind, many--if not all--lenders will run calculations to determine whether they'd get a higher yield from the short-sale or foreclosure. They go with the option that will produce the higher yield. Since your note is still performing, they have little or no incentive to allow you to do the short-sale.
1 vote
Linda Julian, Agent, Barrington, RI
Wed Apr 6, 2011
You may qualify for a short sale if you are experiencing a hardship such as loss of income due to illness or job loss, divorce, job transfer. The banks are extremely diligent to research your hardship to confirm a "true" hardship.
1 vote
Miguel Revel…, Agent, Miami, FL
Sat Apr 2, 2011
Probably the lender will approve you for a short sale, considering that the property is at extremely undervalued. However, if the lender approves you for a short sale, I will make sure to contact an attorney to deal with the deficiency, and most important to make sure that if the lender approves my short sale, that all the necessary documents are signed at closing so I won’t be later responsible for any deficiency later on
(Satisfaction of mortgage, note release, etc.) . Also, I will contact a CPA, to make sure that the 1099 that i will be receiving from the lender will count as nontaxable in my personal income taxes.
1 vote
Moxa Chiu, Agent, San Mateo, CA
Thu Mar 31, 2011
By now you already got 103 answers from Licensed Realtors. I believe you are asking for a solution, to have clarity on your situation. None of us will not be able to help you without getting to know your situation and your goal. And the consequence involve re-align your financial blue print, legal liabilities, taxation, future credit. etc etc. It is not just a Realtor question.

I am member of PWMG, It is a small group of licensed professionals,(including lawyers, CPAs, Investment advisors, Risk Mangament(insurance) Banker, Realtors getting together once a month in San Mateo, Ca helping our mutual client to solve problems.

I might be able to arrange a free consultant with my team for you to give you clarity on your situation. Contact Trulia if you like.
Web Reference:
1 vote
, ,
Mon Mar 28, 2011
Lenders are doing what is known as an NPV (Net Profit Value) test to determine their profitability on approving your shortsale/modification or not. Basically if you are a pass then the lender will consider your request if you are a fail they will not.

The FDIC has a very simple NPV test that many lenders adhered theirs too when putting this mathematical spreadsheet together. People aren't aware that aside from the hardship it is a numbers game. Also, when determining a hardship you should compare 2010 income (AGI) to that of the year you purchased the home. When you purchased your home you provided the last two years of income and the lender approved your loan based on that. Many think their income hasn't changed but are amazed to see the drop in income from then to now...

I do not have a direct link for the NPV test sorry its a spreadsheet I did get from the FDIC. If you have excel I can email it to you.
1 vote
John Walin, Agent, Libertyville, IL
Mon Mar 28, 2011
Rachel is right! Another caveat. You need a lawyer, not some self proclaimed short sale specialist realtor. I have SFR designation, and use it to help buyers get REO's. Think of this situation as you are putting your down payment now on a condo that is worth less, that probably you should of done to begin with. Destroying your credit for 50k? No different if you bought IBM at 35 per share and now worth 25 per share, realize the loss and bring cash to close.
1 vote
John Walin, Agent, Libertyville, IL
Mon Mar 28, 2011
Welcome to this moral hazard area... Bank MIGHT permit you to short sale, but will not forgive the difficiency amount. Just because the condo is worth less than you paid, doesn't mean you have a right to walk away. You need to prove that you cannot afford the house. it is harder than qualifying for a mortgage! Bank goes after assets and gains visibility to tax returns so impossible to play poor. Be prepared to bring oney to close or sign a promissory note for half of the shortage, (if your lucky).
1 vote
Hill Hill, Agent, Gulfport, MS
Thu Mar 24, 2011
Maybe....the qualifications for a short sale are: a financial hardship, monthly income shortfall and insolvency. There is information circulating that some lenders, who initially wanted you to be behind in your payments before they would be willing to consider a short sale, are beginning to sing another song. Lenders do not want to foreclose on properties. Having your property sold as a short sale makes better financial sense to the lender. It is worth your investigation to find out how your lender stands on short sales, and modification. Wish you the best!
1 vote
Tami Winbury, Agent, Ojai, CA
Wed Mar 23, 2011
Hope this helps!
What is a short sale?
A real estate short sale is a form of agreement between the seller of a home in the
beginning stages of foreclosure and their lender, allowing the home to be sold for less
than the existing loan balance outstanding. The mortgagee would accept less than
the loan amount in order to avoid a foreclosure proceeding. This short sale would
result in a substantially discounted purchase price for the buyer of the home. The
buyer would then proceed with the purchase of the home much the same as in any
conventional real estate transaction.
Why would a lender agree to a short sale?
Lenders are in business to make money and keep down losses. When a borrower
gets behind on their loan payments, the lender has the right to take the property to
pay off the debt. However, in the current real estate market, many properties cannot
be sold for the amount owed against them. It is possible to persuade lenders to take
less than the full amount owed if the lender believes that it will make more money
through a short sale than through a foreclosure.
How long does it take to close a short sale?
This is totally up to the lender. Some lenders take as little as two weeks, some over
six months. The only way to know is to start the process. The key is making sure that
your short sale package is complete, and that you follow up daily with the lender.
I want to do a short sale and have a 2nd mortgage,
does this make me ineligible?
No. Both of your lenders will need to be satisfi ed in some way to complete the short
sale. If your fi rst lender will be paid off by the sale, then you just negotiate the terms
with the second lender.
Will a short sale destroy my credit?
Yes and no. The short sale may not show up on your credit. In fact, most mortgage trade lines report “Mortgage Paid” after a short sale. Any late payment history will still appear, as will any Notice of Default fi lings. What won’t report is an actual foreclosure. A promissory note may prevent the lender from reporting the mortgage as a loss. In today’s credit market, a foreclosure may prevent you from obtaining a mortgage for at least 5 years, longer than a bankruptcy.
What is a Hardship?
Some examples of a hardship include:
• Reduced income or unemployment.
• Inability to work due to health reasons.
• Separation or divorce.
• Medical bills.
• Business failure.
• Death of a spouse.
• Adjustment in mortgage payment or
unforeseen increase in your monthly expenses.
• Any other circumstance that cripples your ability to repay your mortgage.
What is the effect of short sale on the seller?
The seller’s debt is cleared. Some lenders may mark the transaction as a settlement, which will hurt the seller’s credit score.
Are there tax implications in short sales?
Much like the issue of credit reporting, the circumstances are individual to the lender. As a short sale represents a loss for the lender, they can report the amount lost a debt forgiveness to the seller. If a formal tax form 1099 is filed, the seller may be responsible for paying taxes on the amount
of debt forgiveness. As of Jan. 1,2011 there are no tax implications on the first loan. Verify with your lender.
Can investment properties be short sold?
Most defi nitely. Any type of property can be sold through a short sale.
1 vote
Robert Cruda…, Agent, Coventry, RI
Wed Mar 23, 2011
This will depend heavily on the bank. I have negotiated short sales in 5 states and have done several where there was not a specific hardship other than the market dropping. Your current financial situation will play a role. If you put zero down then your monthly mtg payment could be substantial. If this is the case your what you earn (net) per month is close or less than what your monthly bills are there will be potential for a successful short sale. Getting a little more specific condos are currently difficult to finance. Many lenders have revised criteria for qualifying condo purchases purchase process more difficult. If your complex/community has a high vacancy rate and the buyer's lender is aware of this it can mean trouble. Conversely, if the seller's bank is made aware of the dire situation the complex is in they will be a bit more flexible when it comes to your specific hardship. I hope this helps.
1 vote
David Cooper, Agent, Los Angeles, CA
Wed Mar 23, 2011
Joe says: "401K plan(even though they can't take this)" Lender will see money in 401L and tell uou to take it out to make the mortgage payment. And I was told that if you have unused credit lines on any credit card, they will tell you to take a cash advance to show hardship.

David Cooper. Las Vegas Foreclosure Houses. FReee List. +1-7024997037 Not a Real Estate Agent. Investor in Single Family Homes.
1 vote
Mon Mar 21, 2011
1 vote
Joe Mendez, Agent,
Mon Mar 21, 2011
Good luck with this one. You didn't elaborate further about whether you have ONE loan or did you also go and obtain a HELOCC as well? HELOC(Home Equity Line of Credit). I had a client who was in this situation. He bought a place in Victorville of all places. Prices crashed and he didn't put any money down on the property. So you invested nothing into the property other than making your mortgage as long as you the prices were fine. I think the banks are tough with sellers who want to sell simply because the price of their home/condo has gone down. The bank is going to check out all of your income sources, savings, 401K plan(even though they can't take this) but they will look at all money available. Real estate always comes back. It will! Is it worth the credit marks you might get by doing a short sale? I think it depends on who the bank is and as one agent stated earlier, perhaps there are other reasons why you can't continue making the mortgage payment. An expert or someone who deals with short sales can help you determine if you may qualify for one. Perhaps look for an agent with CDPE certification. CDPE stands for Certified Distressed Property Expert.
1 vote
Vincent Murp…, Agent, Boston, MA
Mon Mar 21, 2011
Sad world when it has come to short sales. What ever happened to if you cannot pay your mortgage foreclosure????
That is why this Real estate market will fall in the next few years there is still Garbage out there. Sorry to hear your problem but maybe a second job . Good luck but you can start with the Bank they are the one who will help you out on your loan.
1 vote
Jeri Creson, Agent, Studio City, CA
Mon Mar 21, 2011
Before deciding that you do not have a hardship, I would suggest talking with a few short sale specialists, preferably ones who have certifications and are 100% compliant with the new FTC MARS (Mortgage Assistance Relief Services) rules. If you're willing to short sale, that means something is compelling you to be willing to move...have you had job changes, a change in family status, has your budget changed significantly from when you initially agreed to this obligation? Has your family outgrown your condo and cannot sell because the value isn't there, or do you need to be closer to your job at this point in time....why, other than looking at your negative equity are you needing to move? There may be some possibility for relief there. A hardship definition can be fairly broad, and I wouldn't immediately rule out the possibility that you do, in fact, have one. As mentioned below by Justin - get your documentation out...if you are paying out an unacceptable amount of your monthy income on mortgage, you may qualify, even if you feel you are still able to squeeze out the payments. Next, let's assume that after fully exploring, you truly don't have a definable hardship that can be supported by documentation, talk to your bank anyway. You may find that it is preferable to agree to a short sale, and volunteer for an unsecured note in compromise. If it's purchase money, the bank may be prevented from forcing you into a note, but there is nothing, whatsoever, illegal about agreeing, of your own volition, in compromise, with your bank to take on "some of the hit" of the loss, and be responsible for an unsecured note, for a portion which would be likely much less than the actual loss of value you have experienced.

Just an idea ...
1 vote
Roger A. Sul…, Agent, La Quinta, CA
Mon Mar 21, 2011
Hello in San old stompin' grounds

You may be in a difficult situation there because the first priority is financial hardship, over and above anything else. So if you are able to work with the Lender be prepared to make a cash contribution. There is more information available on my website or you can get help when you owe more than your home is worth at the attached link.

If the short sale is not a viable alternative for you, consider discussing a Deed-in-Lieu of Foreclosure with the Lender. This is a graceful way of stepping away from the property without the stigma of foreclosure. Best of luck!
1 vote
Barry Shapiro, Agent, Camarillo, CA
Sun Mar 20, 2011
This question, although rarely asked publically on this venue, is a quite common one for real estate agents that are marketing heavily to distressed homeowners. I noticed you mention you have 2 loans. In California, we are a non-recourse state, meaning that the loans, IF THEY ARE PURCHASE MONEY MORTGAGES, cannot follow you after either a short sale or a foreclosure. In the event you have refinanced that second, you will likely be on the hook, unless you can both negoitiate a payoff and get in writing from the 2nd that they will not pursue the deficiency. Also, through 2012, you will not be liable to the IRS after you receive a 1099C cancellation of debt, from one or both lenders. Read about The Mortgage Forgiveness Debt Relief Act and Debt Cancellation at the IRS site:,,id=179414,00.html Because you are asking this question, I suspect that there truly is a hardship, over and above what you are stating here. Our team specializes in assisting (sometimes current) homeowners obtain a reconvyance on an upside-down mortgage. Keep doing the research, as you are doing, and you will discover the key to your housing dilemna. Good luck and thank you for reaching out for help! Be sure to contact the appropriate tax and legal professionals along the way.
1 vote
Laura Coffey, Agent, Santa Clarita, CA
Sun Mar 20, 2011
For homeowners to qualify for a short sale, they must fall into all of the following circumstances:

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.

This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. There is many reasons that can fall in the above three catergories.
1 vote
Beth Mitro, Agent, Henderson, NV
Sat Mar 19, 2011
A short Sale is a case by case scenario. A lender usually wants a hardship, if you do not have hardship is is likely that they will not short sale. If you want to Short Sale your best bet is to contact a trusted Real Estate Expert and I would be more than happy to refer you to one of my collages servicing your area.
If you could afford it before and there has been no change of job, I suggest to continue to pay your mortgage. It's what you signed up for, I understand how you feel about being upside down, but real estate is a long term investment, hang on to it and one day it will be worth more again and at that time you may be able to get positive cash flow on it, your credit will not be effected by a short sale. Good luck, you will make the right decision.
Beth Mitro
American Realty
Las Vegas NV
1 vote
Justin Ruzic…, Agent, Greenville, SC
Sat Mar 19, 2011

If you sat down and put your financials on paper i would guess that you are close to using 101% of your income, if that isn't financial hardship i don't know what is. There are tons of great realtors who specialize in helping clients in your situation. If you need me to refer you one i would be happy to I am a member of 1000+ agents who deal primarily with short sales.

Here is a blog i did on Budgeting. Has a helpful chart with guidelines as to what % of $$ should go to Mortgage, food, car, utilities, ect..…

Best of luck to you, feel free to email me if you are not able to find an agent who can help you.
1 vote
Suz A, Agent, Longmont, CO
Fri Mar 18, 2011
Hello Almc2011:

If you are turned down on a re-fi, you might try a modification. The good news is rates are better these days and they're down this week. Rates are so low, in fact, it's like they're giving money away.

Banks have been very reluctant to make principal reductions for people who can afford to pay their mortgages but are upside down.

Tough it out for a while.

Look at it this way: You have a roof over your head. You're not looking at a rent increase. You're paying into an investment that was not timed well. So what. I'm in company with others who took note of the fact you put no money down. There are plenty of Californians who put a huge chunk of their money and lives into their home. These people will be anxiety ridden while all the problem loans are cleared out - a process that will take years. But they're determined to make good on their mortgage.

Also: You leveraged something you have no stake in. Now you want a break ... because ...?

California real estate might have been one of the better investments of the last century. Year after year, it paid and paid well. The perception was all you had to do is get on the train. I personally know people who became millionaires by virtue of the fact they bought a home there. But there was never a guarantee you could sell a few years later and cash out with a profit.

It's just a paper loss until the day you sell. If you sell, then you're a loser. (The only cure for that is to buy again right away in the same market.)

There is a saying: You pay your dues and take your chances. You didn't even pay for your ticket. Now you want to get off because the gravy train stopped? It's a train! It makes stops!

Please ...

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1 vote
Paul Montano, Agent, Chula Vista, CA
Thu Mar 17, 2011
A short Sale is a case by case scenario and a scenario can be projected in several ways. If you want to Short Sale your best bet is to contact you trusted Real Estate Expert and if you don' t have one I would be more than Happy to refer you to one of my collages servicing your area.

Best Regards,

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1 vote
Helen Graham, Agent, Reno, NV
Thu Mar 17, 2011
No, you signed a note with the bank and if there is no hardship involved there is no reason to believe that the bank would agree to a short sale.
There are many reasons for hardship, please check my blog at http://RealEstateByGraham for lots of information on short sales
1 vote
Get-smart, , Durham, NC
Thu Mar 17, 2011
No the lender put their neck on the line for you to purchase a home and now you want to back out of the deal, no you will need a hardship. Would you agree to a short sale if you loan someone a couple hundred grand but they want to back out now because their house isn't worth the amount they loaned? I would think not.
1 vote
Moxa Chiu, Agent, San Mateo, CA
Thu Mar 17, 2011
This is a great question. There is no straight answers of Yes and No, it depends. Every case varies with owner and lenders special situation, e.g their relationships and their loan agreements. It is a mortgage, a credit line.

However, the hardship letter is not the only thing we need, and its function in a short sale transaction is just as part of the document some lender need. Whether they are reading them and judging from it is questionable.

The issue we need to consider with every decision we made are the consequences. e.g Credit scores, Taxation, and your future home, your career. Some losses can not be evaluated by money. Moxa
1 vote
Diane Wheatl…, Agent, Upland, CA
Wed Mar 16, 2011
HAMP and HAFA guidelines state that you cannot claim a hardship based on economic reasons associated with the value of your property. However, there must be some reason that you are attempting a loan modification such as your inability to continue making the mortgage payment.

If you are able to make the payment on the condo without difficulty or as easy as you always have since the purchase of the home then the lender will ask you why you are attempting a modification. Be prepared to answer with a viable reason other than you are upside down in your equity. The banks will believe that you are attempting a "strategic default" and will decline your request.

Good luck!

Diane Wheatley, Broker
1 vote
Nvfamily, Home Owner, Henderson, NV
Mon Mar 14, 2011
It is interesting that divorce is considered a hardship, or running a company out of business is considered a hardship, or even being a underperforming employee who is fired is a hardship, but those of us who are employed and happily married get screwed.
1 vote
Gerard Carney, Agent, Spring Hill, FL
Sun Jan 23, 2011
This is not a hardship case, The hardship here would be totally to the bank, you puit nohing into this poperty and now you wish to walk away, how nice, but what about those that put 20% down, good hard earned moiney, that will be lost due to the short sale and lose of property. I get tired of the no money downers crying about a l ose, a lose to what? you risked nothing and had everything, if yu wait on this property it will come back up in value, so lets see, I can still afford the mortgage paymets but what? Whaa Whaa Whaa it's not wrth what is was when I purchased it, give me a break, Pay the mortgage and wand wait for he market to come back. You have nothing lost and can at some point have something ganed. Good people got pinched in this market, they were thrown out of their homes and had their financial standing ruined, they now have to rent and because of credit many have to deal with shadey land lords and have to live in sub standard housing. You need to suck it up and hold onto the property you have and keep one lewss short sale off the market so we can shore up this mess and get back to a market where a fair arms length selling can once again rule the market! And Banks shoul in the future naver allow no money down financiang, these people that take advantage of it seem to be the first to walk away from it whe the market bucks. Again nothing was risked by the buyer so why should they stick with it and ride out the rough times.
1 vote
Gary Bransco…, Agent, Salt Lake City, UT
Fri Jan 21, 2011
Qualifications for a Short Sale

Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.

The Home's Market Value Has Dropped.
Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

The Mortgage is in or Near Default Status.
It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

The Seller Has Fallen on Hard Times.
The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

A few examples that do NOT constitute a hardship are:

Bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
Unhappy with the neighbors. Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.
Buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.
Pregnancy. Increasing the size of your family or starting a family is not considered a hardship.
Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.

Examples of hardship are:

Medical emergency / sudden illness
1 vote
Eli Givoni-S…, , Boca Raton, FL
Fri Jan 7, 2011
Yes, you it is possible for you to do a short sale. If there's no hardship, the bank may ask for a seller contribution. Even with the contribution, it will be far less than your total amount due. So, a short sale could be a great option for you.

Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states
1 vote
Tni LeBlanc, Agent, Santa Maria, CA
Fri Jan 7, 2011
Anyone can ask for a short sale.

And a lender can decide to give it for any reason.

Do you need to move, is there a change in family circumstances, is a hardship imminent? Are the payments unaffordable? What I'm getting at is that there are other factors that your lender might probably consider. Not every lender is the same. Most people are forcing the issue of hardship down the bank's throat by not making payments, but you don't have to do that. I just completed a short sale where the owner only missed one partial payment at the very end. The lender could see that default was probable anyway given how upside down they were so they agreed to it.

A bank is generally not going to encourage you to do a short sale -- they have a lot of other pots boiling. You can also attempt to do a short sale through the HAMP program and not miss any payments. Even if you don't qualify for a HAMP loan mod you may be "HAMP eligible" in the sense that you can request relief through HAFA which can allow a short sale or a deed in lieu of foreclosure - but you have to go through the HAMP process to get there first. There are options out there. Be honest and up front about your situation with the bank, but also be persistent. Always consult with a qualified attorney and a tax professional on the decision to do a short sale.
1 vote
CJ Brasiel, Agent, San Jose, CA
Fri Jan 7, 2011
Alm -

From my recent blog post. For a short sale, the owner must prove the following:

1.) The owner must have a negative debt to income balance. Simply stated, the home owner’s income is not enough to pay their monthly bills. There are many reasons why monthly incomes change. Job loss, reduction in hours/salary, disability, and death.

2.) The owner must be insolvent. Meaning the home owner does not have any assets that can be sold to supplement their income or pay off the debt. This does not include retirement funds but there have been cases where the lender asked for the owner to pay some money at closing and this is the only place an owner can withdraw funds.

3.) There must be a documented hardship. The owner must be able to demonstrate that something has changed preventing them from being able to afford the home. There are many reasons for hardship. Common reasons are job loss, health issues, and divorce. Adjusting interest rates which increase the mortgage payment suddenly can also be a reason for a short sale hardship.
1 vote
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