In a Short Sale, what is a Hardship?

Proving hardship is the key element in a short sale and pre-foreclosure sale!  If a homeowner wants to have the bank “absorb” the deficiency in a short sale, the homeowner’s lender must “approve” the short sale.  The short sale approval is based on the homeowner’s ability to show hardship in that the homeowner is financially unable to maintain loan scheduled monthly payments and associated fees.  The homeowner’s lender will look at many factors in their evaluation of the homeowner’s overall hardship, but the primary hardship factor they’ll look at is the homeowner’s monthly CASH FLOW.

**This means anything that has caused a decrease in income, an increase in expenses, or a combination of the two.**

In determining hardship, the homeowner will need to provide their lender a hardship letter describing what’s been causing hardship, a financial statement, two months of recent bank statements, two years tax returns, as well as a few other items to evaluate the borrower’s hardship.

Examples of hardship are:

  • Reduced Income or Unemployment.
  • Inability to work due to health reasons.
  • Separation or Divorce.
  • Medical Bills.
  • Business Failure.
  • Death of a Spouse.
  • Adjustment in mortgage payment or unforeseen increase in your monthly expenses.
  • Taking on and helping elderly parents.
  • Any other circumstance that cripples your ability to repay your mortgage.

This is Dan Akulow and remember – I sell short sales!  Call me at 209-602-0299 when your ready to list your home for sale or if you would like some more information.  Also, please feel open to share this post with anyone you know that is considering a short sale or whom you believe may lose their home.  A short sale is much better than a foreclosure.

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