the 4-1-1 on short sales
Every upside down scenario doesn’t indicate short sale, and not all loans qualify as having short sale feasibility. At least three key elements must be present before a short sale may even be considered.
- The specific loan itself must be eligible for a short sale workout as imposed by servicing criteria. If deemed eligible, all servicing criteria must be met. Some criteria includes loan default, or mortgage foreclosure. The property must be marketed for sale at a defendable, fair market value. The property must be sold in its as-is condition with no seller concessions, and the seller can’t receive a dime from the transaction. Typically, the lender sets a minimum net recovery in the form of a percentage of the confirmed, as-is value. Anything impacting their net recovery (real estate commissions, closing costs, liens, etc.) as evidenced on the HUD1 will influence the lender’s decision to accept or reject a short sale proposal.
- There must be full documentation of long term, financial hardship, and the inability to pay the mortgage, cure the default, or sell without special lender consideration & concession, and
- The lender must view the loan as at risk of loss.
If all these elements are in place…. then we can proceed with the construct of a formal request for short sale consideration.