Short selling is probably hardest on the homeowner. A short sale is rarely a first choice, so your house has probably been on the market for some time. Meanwhile, you're falling behind on your mortgage payments and money is probably tight. In order to get the bank to approve your short sale, you need to meet some criteria and prove them in writing:
- Financial hardship:You need to prove that a drastic life change, like a divorce or a layoff, is affecting your ability to keep up with your mortgage payments. The bank is going to want a hardship letter that explains your situation in detail.
- Proof that you're upside down: Show that your home is worth more than you owe, either through an appraisal or comps from a broker.
- You can't afford your mortgage payment: This should be easy to prove.
- You're not eligible for loan modification: Talk to your lender and have them verify that you don't qualify.
All of that paperwork is time consuming, and if anything is missing or filled out incorrectly, it can delay things even more. An experienced real estate agent can be a huge help here. Find someone who's familiar with short selling to help you navigate the process. Paperwork can often mean the difference between taking several months to close and missing out on the sale all together.
As the seller, you're also responsible for making sure that you get approval from all lenders that have a lien on the property, which applies if you have any other loans against your home, such as a second mortgage or home equity line of credit. You can't complete a short sale unless these junior lenders are also on board, and failure to contact them early can hold up the process or even cause the sale to fall through.