The short sale process is a very frustrating and lengthy one. There used to be a time when short sales could be resolved and approved within 2 weeks.  Now, they can take anywhere from 30-180 days to complete - if indeed they ever DO reach a resolution. They should now be called "long sales".  Today, many short sales are never even reaching a negotiator's desk at the lending institution.  Many files are stuck in limbo with unwilling, understaffed and simply uninformed lenders. 

It is important to understand that not all sellers and not all properties will qualify for a short sale.  Yes, there is a qualification process.  It is not enough to say "Hey, I made a bad investment with this property, so I think I'll try to sell it for less than what is owed". 

First, there must be some sort of financial hardship.  Did the seller lose his job?  Did the interest rate skyrocket, thus making the property unaffordable?  Is the seller trying to sell the home, but due to market conditions, it is no longer worth what is owed?  What are the circumstances that are making your mortgage unaffordable?  Why are you no longer able to keep up with your mortgage payments?

You do not necessarily have to be behind on your mortgage payments in order for a lender to qualify you for a short sale.  This used to be the case, and there are many people who say this is still the case, but it is not.  However, if you are already behind on your payments, there is no time to waste.  In fact, if you are already behind, we hope that you have already contacted your lender or mortgage servicer to see if 'something' can be worked out.  Many lenders would rather renegotiate the terms of your debt, than to write off a loss.

Secondly, if you have plenty of cash reserves, other financial investments (lenders will usually not consider a 401k - so that may be safe) or if you have a positive monthly cash flow, the lender may not qualify the seller for a short sale.  This is not always the case, however. Therefore, all short sale cases must be explored on an individual basis as there is no ONE litmus test. 

Lastly, the seller must owe more on the home than its current market value.  If a home is worth $200,000 and you only owe $180,000, then there is $20,000 in equity.  Why would a lender take a loss when the Seller can take the loss?

So, if you can not keep up with your payments for a viable reason, if you don't have the cash reserves or sufficient income to pay your debt, AND your home is not worth what you owe... then a short sale may be in your future!

As of just recently however, things are getting better.  The Obama administration is working on the Making Homes Affordable program which will offer incentives to lenders to engage in short sales. In the near future, we hope that this process will be streamlined to provide a quicker resolution to save more sellers.

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