Do you have to be in financial hardship to put your house on short sale? What if you're not and basically?

Asked by Mona Lisa, San Lorenzo, CA Tue May 13, 2008

just want to get out of the property/debt?

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Charo Bhatt, Agent, Fremont, CA
Thu May 22, 2008
If are not in any financial hardship and if you have to sell your home at a short sale,
lender may ask to sign a promissory note for that dollar difference( shortage) for a 15 years term.
You may negotiate with bank, depends on how much is the amount of the short, what kind of your current loan is, for how long you have had this loan and rest of the situations.

If you like feel free to call me at 510-381-2105 or
email me at
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1 vote
Don Tepper, Agent, Burke, VA
Wed May 14, 2008
Two thoughts/comments:

From a financial standpoint, contact a financial planner. There may be (there likely are) some strategies you can pursue to reduce your debt and to put yourself in a better financial position.

From an ethical standpoint, ask yourself whether your word means anything. Forget the legalities. Forget the documents you signed agreeing to pay back the loan. You said you'd do your best to live up to your obligations. That's what you told the bank. Now, although you acknowledge that you're not in financial hardship, you'd like to stick the bank with a loss. You'd just like to get out of the property and eliminate the debt. So would a lot of people. But many of them find other ways to deal with the situation. You want more money? Get a second job, or a first job. Want more money? Cut back on unnecessary expenses--maybe eating out at restaurants, or cable TV. Trade in that SUV for something that gets 30 mpg. The financial planner will have many suggestions.

Sure, a short sale is the "right" answer--financially, morally, and ethically--for some people who really have no other options--they're out of money, they're upside down so they can't sell, they want to avoid foreclosure, if possible.

But, bottom line is that ethically and morally--not to mention legally and contractually--you made a commitment. Live up to it.
1 vote
Matt Harber, Agent, Tacoma, WA
Wed May 14, 2008
Hi Mona Lisa

Tisza Major's answer was pretty much spot on. When you signed your closing documents, you made a committment to pay back the loan in full and the banks intend to make you satisfy your end of the agreement at the cost of thoroughly wrecking your credit with the club that they wield around known as foreclosure. There are other situations that would possibly qualify as a hardship, such as having to relocate for a job, medical issues, etc..

Also, as Tisza mentioned, the best advice is to consult an expert in your market place that deals with your current climate. Obviously, from an objective point of view, it may well be worth it for you to cut your own losses and get out from the property yourself and make up the difference, as opposed to holding it, or renting it even. Thats just a numbers game however and one you should again, sit down and go over with someone who works in the business daily and can help guide you through it.

One last thing to consider that I don't think Tisza mentioned, is that even if the bank will look at the possibility of a short sale, if you have other assets available to you, the banks are more than able to ask that you participate in sharing in the loss and liquifying some of those assets that are not "necessity." ie, a second home, cash or stock reserves, etc. In my experience, they haven't gone after retirement or things of that nature, but just be aware, that in a short sale, they may well ask and have every right. You obviously do not have to participate, but they most likely, in turn won't help facilitate your short sale.

Hope that helps.
1 vote
Derrick Sakai, , San Leandro, CA
Thu Apr 14, 2011
It's best to keep the house or have it leased instead.
0 votes
Kenneth Young, Agent, Newark, CA
Mon Sep 6, 2010
Yes. You have to be in financial hardship to sell your house as short sale. Otherwise you have to pay all the shortages to your lender. If you need help to sell your home, we have buyers/ investors. See our web site at
0 votes
Darren Smith, , Menifee, CA
Thu May 22, 2008
I am frustrated by the judgement of some of these answers. I consider a significant loss in equity a hardship, I also ask myself what does corporate America do, faced with similar losses. Simply put, an appraiser and the lender approved the value of the property, I would bet your Realtor and Lender led you to believe there would be appreciation in your investment. And I know Investors faced with these types of losses will hand back the keys on a deed in lieu of foreclosure or short sell. Lenders are expecting significant numbers of short sales and have stated they will cooperate in the approval process, in order to work through the distressed inventory as quickly as possible. Talk to your financial advisor, and disregard the people who try to stand in judgement of your making a very difficult decision.
0 votes
Myke, Home Buyer, 89449
Thu May 22, 2008
Don - I really have to commend you on your comment.
Of all the people on here - you're the first one to actually be a human being and say "stand up and take responsibility for your own mess."

if we had a few more people like you runnin around - it might restore my faith in humanity.

0 votes
The Hagley G…, Agent, Pleasanton, CA
Thu May 22, 2008
Whatever you do, just make sure you are working with an EXPERIENCED short sale agent. Make them prove it. Talk to a short sale seller that they have successfully represented in the last couple of months. Good luck - there are buyers out there!
0 votes
Pacita Dimac…, Agent, Oakland, CA
Thu May 15, 2008
If the reason you are exploring short sale is the amount of your mortgage payment, you may want to speak to your lender...if you can do it face to face, even better. Some lenders may be receptive to negotiating your loan so that your monthly mortgage payment is reduced. They'd rather do this that sell a property as a short sale or worse, foreclose.

Protect your credit. A short sale and a foreclosure could do real damage. Remember, even if you decide to rent, most property management companies will check your credit and may refuse to rent to you if there is evidence that you haven't met/paid your obligations.

Walking away when you don't have to is irresponsible and comes with a very high price.
0 votes
NonRealtor, , 23456
Wed May 14, 2008
Hi Mona
Debt is a part of life for people like you. Keep the house. Its not a good time to sell your house. Where are you going to live?
0 votes
Keith Sorem, Agent, Glendale, CA
Wed May 14, 2008
I like these responses to your post. You are not alone. There are many people who want others to pay just because they are affected by the market. The truth is that the market goes up, and it goes down.

How would you like your bank to foreclose on you when your property increases in value, and take the profits? You want to rip off the bank, the bank wants to rip you off. It's only fair.

So sit there and don't move, and you don't lose. You could rent it out, that might be a wise idea depending upon your situation.
0 votes
Laarni G. Om…, , Orange County, CA
Wed May 14, 2008
Hi Mona Lisa,

I can totally understand your sentiment. but the lenders packet requires you to explain your predicament. Financial Hardship is, I would say, the foremost reason for them to accept your short sale proposal. Hang In there- if you can totally avoid the "mob" mentality and concentrate on your household, you will be fine.

Good Luck,
0 votes
Tisza Major-…, Agent, Upland, CA
Wed May 14, 2008
Hi Mona Lisa,

One of the main criteria for a Short Sale to be approved is a demonstrable hardship like the loss of a job or a significant downturn in business. The lender will want the homeowner to explain what happened that prevents them from fulfilling their commitment and promise to repay the loan they accepted.

Remember that although a Short Sale is not as damaging to your credit as a Foreclosure it is not a "get out of jail free" card either. I would advise a client of mine asking this question to evaluate very carefully the decision they are contemplating. A loss of value because of a market downturn is not really a good enough reason to ask a lender to take a financial hit.

Short Sales are designed for people who simply put have no other options, not for people who just want to get out from under a property that they no longer want to continue paying for.

Talk to a Realtor in your area to see what the value of your home currently is and to see if you might be able to sell your home - not as a short sale but perhaps at or just below the break even point so that you are able to get out from under the debt and won't destroy your credit either.

Good luck with your situation and thanks for asking the question.

Take care and have a wonderful day!

Tisza Major-Posner, Realtor, IVPG (909) 837-8922
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0 votes
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