The second step of a successful short sale is Valid Hardship. As a homeowner you have to proof that you are experiencing a hardship in order to qualify for a short sale.
Here are some examples of hardship that you can use to qualify for a short sale and exit your property that is worth less then what you currently owe.
Number one hardship that current homeowners are facing is a change in their financial situation. That includes unemployment, income reduction and increase in housing expenses. There are many home owners who have lost their jobs during the last few years. However you don’t necessary have to lose your job to experience a hardship. Income Reduction is considered a hardship as well. Circumstances outside your control such as elimination of overtime, reduction in regular working hours, a reduction in base pay that have caused a decrease in your income can create a valid hardship for your family. Increase in Housing Expenses due to circumstances outside your control is considered a hardship as well.
The second common hardship that current borrowers are experiencing is divorce or legal separation. This includes separation of borrowers unrelated by marriage, civil union or similar domestic partnership under the applicable state law. There are few documents that you will need to proof this type of hardship. Examples of such documents are a divorce decree signed by the court, a separation agreement signed by the court, a current credit report evidencing divorce, separation, a bill on the non-occupying borrower name with a different address, or a recorded quitclaim deed evidencing that the non-occupying Borrower or co- Borrower has relinquished all rights to the property.
A third example of a hardship is a death of a borrower or a death of either the primary or secondary wage earner in the household. Proving this type of hardship requires a death certificate, an obituary or a newspaper article reporting the death.
Long-term or permanent disability, serious illness of a borrower, a co- borrower or dependent family member is also considered a reason for experiencing a hardship. In order to proof this type of hardship you can provide the agent that is processing your short sale with a copy of your monthly insurance benefits or government assistance, or a written statement or other documentation verifying disability illness. Other documents that qualify as a proof of the forth type of hardship are doctor’s certificate of illness or disability or medical bills. However you are not obligated to provide detailed medical information.
Distant employment transfer or relocation are considered a valid hardship as well. Nowadays when businesses are closing doors and people are losing their jobs, many borrowers are required to look for employment out of state. If you are an active duty service member you can use the notice of Permanent Change of Station (PCS) or actual PCS orders in order to proof your hardship. Borrowers that are not an active duty service members will need a copy of signed offer letter or notice from employer showing transfer to a new employment location. Other documents that can be used as proof are pay stubs from new employer or you can also provide written explanation of your situation.
Business owners experiencing a business failure also qualify for a short sale. In order to proof your hardship as a business owner you will need to provide the business tax return from the previous year (including all schedules) and a proof of business failure supported by one of the following:
-bankruptcy filing for the business
-two months recent bank statements for the business account evidencing cessation of business activity
-most recent signed and dated quarterly or year-to-date profit and loss statement.
Natural or man made disaster adversely impacting the property or borrower’s place of employment are also considered a reason for a valid hardship. Documents required to proof this type of hardship are insurance claim, Federal Emergency Management Agency grant or Small Business Administration loan, or a proof that the borrower or borrower’s employer property is located in a federally declared disaster area.
If you are a borrower experiencing a different type of hardship please submit your comments below. I am looking forward to your comments and suggestions.
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I am looking forward to helping you with your real estate needs!
Boca Raton FL Real Estate Sales and Solutions – Tanya M Kovacheva REALTOR
7 Stars Realty is a boutique real estate firm, that is committed to give exceptional care to our clients and exceed their expectations. I specialize in helping buyers and sellers with their real estate needs in Palm Beach County including Boca Raton, Delray Beach, Boynton Beach, Wellington, Palm Beach, West Palm Beach, Lake Worth, Loxahatchee, Highland Beach, and the surrounding areas. (561)-289-8313