Short Sale Hardships: What does the bank consider a hardship?

Short Sales happen when the homeowner owes more than the house is currently worth and can no longer afford to make payments. The homeowner wants to sell the home, but the amount the home could sell for won’t cover the principal balance of the mortgage.

There may be plenty of situations where the homeowner owes more than the house is currently worth due to a change in the market, but this alone does not qualify you for a short sale. If you can still afford to make your payments, the best course of action is probably to wait until the market turns around and/or you have enough equity in the property to no longer sell at a loss.

So just having an underwater mortgage doesn’t qualify you for a short sale, but what does? Hardship.

Hardship is some extenuating circumstance that has made making your mortgage payments unfeasible. There are many things that constitute hardship, but ultimately you will need to plead your case to the bank in a hardship letter. The hardship letter is a one to two page document explaining the hardship situation that mentions, includes, and elaborates on any of the following hardships the mortgager is experiencing.

Some examples of hardship include:

  • Death or illness of principal mortgagor
  • Death or illness of mortgagor’s family member
  • Marital difficulties, separation, or divorce
  • Reduction of income
  • Unemployment
  • Excessive obligations
  • Job Relocation
  • Property problem (roof leaks, construction litigation, etc.)
  • Incarceration
  • Inability to rent property
  • Military Service
  • Casualty loss (such as a Hurricane, etc.)
  • Energy-Environmental costs
  • Servicing problems
  • Payment adjustment (ARM Adjusting)
  • Payment dispute
  • Transfer of ownership pending
  • Fraud
  • Abandonment of property (due to condition of property, for instance)\
  • Bankruptcy

If one or more of these hardship situations applies and the mortgage is more than the property can sell for the homeowner is likely a candidate for a short sale.

If you are experiencing a hardship and can no longer afford to pay your underwater mortgage, Rob’s team can help. Call him at 703-587-0995 today to learn if this is an option for you.