Hardship vs Strategic Short Sales
HARDSHIP SHORT SALES
A typical short sale involves some sort of owner hardship situation. The list below represents hardships that may be acceptable to lenders. You may have a valid hardship that isn’t reflected on this list.
- Payment Increase or Mortgage Adjustment
- Loss of Job
- Business Failure
- Death of a Spouse or Family Member
- Severe Illness
- Divorce
- Inheritance (Rarely does someone think of an inheritance as a means for distress. However, heirs are left to pay mortgage bills, utilities and maintenance that they did not expect and could cause a financial hardship.)
- Involuntary Relocation (May relocations are necessities, not choices. This can quickly cause unexpected financial distress since very few homeowners can support two households for any length of time.)
- Military Service (Servicepersons who have had their periods of active duty extended often suffer a tremendous amount of financial pressure.)
- Reduced Income (If a person is in a commission or bonus based business and the economy suffers, often their income suffers even though employment is maintained.)
- Too Much Debt
- Incarceration
STRATEGIC SHORT SALES
A strategic short sale is a when a homeowner is able to continue making payments on the loan(s) and is often times current on the payments, but is upside-down on the property and wants or needs to sell the property. There may be a slight or severe hardship or no hardship at all.
In a strategic short sale, the homeowner is making a business decision to sacrifice a derogatory remark on their credit report to get an upside down property off his books and decrease their debt load.
Typically when a homeowner is doing a strategic short sale the lender will ask the homeowner to contribute funds to the shortage. The funds required varies depending on the shortage, the bank and the negotiation skills of the real estate agent. Most homeowners that want to do a strategic short sale will also want to make sure that if they do contribute funds that the bank give written confirmation that there will be no deficiency judgement in exchange for contributing funds.
