The myth in short sales is that everyone who owes more than they can get for their house qualifies for a short sale with their lender. It’s a process and there are indeed qualifying factors.
South Carolina House Buyers – We Buy Houses Charleston SC: You may have heard that you can get a short sale to pay off your mortgage and that the bank will be happy to get most of what you owe them. It’s better than nothing, right? It is most likely more than what the bank will get if they repossess the house and have to sell it at an auction. This is true in some cases. There are definitely conditions that are required and you should be sure that you qualify before you consider it.
A short sale will help you to pay off your mortgage if you become upside down in your loan. That means you owe more than your property is now worth, since the market has taken such a dive and properties have declined in value, some dramatically, since you took out the loan. For example, you paid $340k for your house and took out a loan of $300k to buy it. The house was well worth what you paid for it back then, but it now worth just $260k and you still owe $280k of your mortgage loan. You are now upside down.
Selling the house to a buyer for the current market value of the house will get it sold, but will not be enough to pay off what you owe.
The bank can agree to accept the amount the buyer will pay and forgive you the difference. The problem is, not everyone will qualify for a short sale. The most common, and incorrect, myth is that you will qualify if you owe more than the house is worth. That’s not necessarily true.
The reason for the short sale must be a legitimate one. Otherwise the bank will expect you to make up the difference or hold onto the property until you can get enough for it to satisfy the balance of the loan.
Legitimate reasons for short sales include such reasons as job loss, drop in income due to circumstances beyond your control, illness, an accident that leaves someone in the family with a debilitating recovery period or disability, or other such reasons. The bank will not usually agree to a short sale because you quit your job, ran up all your credit cards buying things you couldn’t afford, or purchased a home you couldn’t afford in the first place. They will be taking the hit on the difference and must explain this to their investors so the reason must be legitimate in most cases.
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