If you are an area home owner facing a potential foreclosure and want to consider a short sale, then one of the things a lender will consider is whether or not a hardship exists. If a home owner doesn’t have a hardship, the lender will most likely only agree to the short sale if they sign a promissory note for the short part. Just because a home owner wants a short sale does not mean the lender will agree. There is no guarantee of success with a short sale.
So what is a hardship?
- Job loss. If a home owner loses a job, or as Salemites are seeing a lot of right now, had a substantial pay cut, and the mortgage payment can’t be made, then talk to the lender about a possible short sale (after you have tried loan modification).
- Health problems. Bad things happen to good people or to children. Some families have gone bankrupt caring for children with health problems. This would qualify as a hardship.
- Death of a spouse or partner. If a couple was relying on two incomes to pay the mortgage and the was a death of one of the wage earners, then lenders consider this a hardship.
- Divorce. If you have the war of the roses type of divorce then you will end up in bankruptcy court. If one partner isn’t able to take on the home itself and it needs to be sold then this could be construed as a hardship.
- Relocation. If a home owner gets relocated for work, which is happening more and more as businesses consolidate and the house can only be rented or sold at a loss the lender might consider that a hardship.
- Bankrupt. Many people have spent all of their savings trying to ride out the down market, and there is just nothing left. If you are financially insolvent, then the lender might consider that a hardship.
A hardship is pretty basic. Was there any reasonable way for the owner of a home to be able to keep the property and make the payments? Sellers wanting a short sale have to be able to prove that there was no other way for them to be able to keep the house.