It is important to understand that not all lenders will accept short sales or discounted payoffs, and not all Sellers will qualify for a short sale. Yes, there is a qualification process. In most short sale cases, the Seller must have a proven hardship and must owe more to the bank that what the home is currently worth. It is not enough to simply say that you cannot sell your home for what you owe. It is not enough to say that you want to move to a bigger home and that the market isn’t good enough for you to get a Buyer. It is not enough to say “Hey, I made a bad purchase, so let’s just dump this home”. Rather, there must be some sort of extenuating circumstance that is preventing you from selling the home and completely paying off the entire debt. Additionally, you must also show that the current circumstances have affected your ability to continue making timely mortgage payments.

Common hardships that may be acceptable to banks include divorce, curtailment of income, job loss, job transfer, medical issues etc. Banks want to ensure there is a valid reason to take a loss. Sellers must be able to prove that they are enduring a financial storm by providing mountains of paperwork to the bank such as bank statements, paystubs, tax returns etc.