Short Sale Approval

Most people consider the short sale a fallback in case they do not qualify for other loss mitigation methods, such as loan modification. But not everyone understands that a short sale is mostly a lender’s decision. For a bank to grant a short sale approval, the deal must make financial sense to them, particularly in comparison to a foreclosure. In other words, a short sale will get approved only if the bank stands to lose less money than if they foreclosed on the home.

So how do you ensure short sale approval? Since each bank has its own standards, there’s no formula that works for every homeowner. However, there are steps you can take to improve your chances of getting approved. This article shows you how.

Reasons for a Short Sale

The first requirement for a short sale approval is a valid reason. While you don’t have to be seriously delinquent to qualify, you do need to present a convincing situation. The following are some good reasons to apply for a short sale:

-Fallen market value: The unpaid balance, which may include expected prepayment penalties, may be higher than the home’s current value.

-Mortgage default or in near default: You may have missed several mortgage payments, or are in a tight situation which could lead to a potential default.

-Financial hardship: If you’ve lost your job, had an accident, or got divorced, your bank can approve a short sale provided that the hardship is over and you can get back on track.

Alternative Methods

The lender may also consider a few alternatives before giving a short sale approval. For example, if they discover that you have other assets (such as a second home, stocks, or even a retirement account), they may decide you have the ability to bring the mortgage current and deny your application. Or they may approve the short sale, but still require you to pay part or all of the remaining balance after closing.

Professional Assistance

The best way to ensure short sale approval is to work with agents who have experience in the field. A good agent will do more than market your home—they’ll also help you negotiate with your lender, improve your home’s appraisal, and give you advice on putting your finances back in order. It may cost more at the outset, but when your mortgage is on the line, professional help is always worth your money.