Will you be approved for a short sale?
A short sale is the process used to sell a property with mortgage debts in excess of the property's market value. If you want to sell, but are faced with a negative equity situation, you may be wondering if you can qualify for a short sale.
How is short sale approval determined?
Lenders approve short sales for one simple reason: To minimize their financial losses. They don't approve short sales to be fair, or to help homeowners. Lenders lose a lot of money having to foreclose on homes, and will always seek an alternative resolution when faced with the threat of foreclosure.
Will you qualify for a short sale? Find out now!
The short sale approval comes down to establishing two facts:
- The home is worth less than the balance of the mortage (and closing costs), meaning the bank won't recoup their losses if having to go through the foreclosure process and then resell the home on the market as an REO (bank owned home).
- The borrower's financial situation proves that making the mortgage payments is unsustainable.
When these facts can be established, the lender will decide that it is in their best financial interest to approve a short sale for the borrower, as this option leads to minimize losses.
Your lender will require that you have a qualifying hardship leading to a monthly financial shortfall. This usually involves some type of financial hardship resulting in a current or imminent inability to continue paying the mortgage payments, and ultimately a foreclosure.
If your mortgage lender determines that you can and will pay your mortgage payments now and going forward, your short sale request will be denied. The bank's only compelling reason to approve your short sale is their financial gain. So what does the bank determine to be a qualifying hardship?
The most common financial hardships that are easily approved and widely accepted by lenders:
- Pending foreclosure sale.
- Missed mortgage payments.
- Unemployment.
- Employment or military relocation.
- Divorce from a contributing household member.
- Death of a co-borrower/household wage earner.
- Actively in pre-foreclosure.
- Increase in expenses including; property taxes, insurance, mortgage payment adjustments, household expenses.
- Decrease in income.
- Natural disaster impacting property or employment.
- Medical issues.
However, there are other, less common situations that can also be approved, if presented properly to establish a financial hardship:
- Excessive forbearance obligations.
- HUD Partial claims leading to excessive mortgage debts.
- Future financial obligations that will lead to imminent default.
- Purchased a new home and unable to pay for old.
- Bad tenant situations that result in financial losses.
- Properties needing significant repairs out of reach for borrowers income.
- Voluntary career changes.
- Voluntary relocation.
There are a lot of life circumstances that are not "standard" reasons to have to short sell, but may in fact be approved by your lender when presented properly. There is a lot of misinformation out there on the web regarding what is and is not an acceptable hardship. Before assuming your “hardship” doesn’t qualify, talk to me!
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Last Updated on August 6, 2026 by Minna Reid
