If you're in a position where you need to sell your home and you are experiencing a financial hardship, selling your home as a short sale might be an option for you.
A short sale is when the seller asks their lender (or lenders) to agree to take less than the amount owed on the home as payment in full. It's considered a short sale when the sale price is insufficient to pay off the total mortgage and costs of the sale. Short sales usually take longer than a traditional home sale because it requires the lender to approve the purchase agreement.
Every lender has different standards that sellers must meet in order to qualify for a short sale. The criteria you will likely need to meet include:
- Experiencing a financial hardship
- Owing more on your mortgage than your home is worth
- A mortgage status either in or near default
- Not having a source of assets available to pay the difference between the sales price of the home and your remaining mortgage balance
If your lender approves the short sale, your financial problems won't be solved. Your credit score will be impacted as a result of a short sale transaction and you may be asked by your lender to pay back the difference between the sales price of the home and the remaining loan balance. If the lender forgives any amount of the loan, it is generally considered income on which you may have to pay taxes. Be sure to consult your real estate attorney and your accountant for details on the financial implications of a short sale.
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