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When can sellers pursue a short sale?

On Behalf of | Mar 23, 2020 | Real Estate Transactions |

Nowadays, debt is almost an inevitable part of everyday life. Many young people start accruing debt when they attend college. In the years after that, many people also accumulate debt when they purchase a home of their own as they reach landmarks in their personal and professional lives.

However, the national mortgage debt reached an all-time high in 2019, totaling roughly $9.4 trillion. And the average mortgage debt for Connecticut homeowners is $225,386. Dealing with this debt can be difficult. In extreme cases, when individuals struggle to pay their mortgage debt, they might face foreclosure.

However, individuals might be able to pursue a short sale.

A short sale is possible when homeowners face financial hardship

In a short sale, homeowners sell their homes for less than the mortgage balance. The proceeds of the sale go to paying off the mortgage lender. Lenders must agree to a short sale before homeowners can pursue this option since the proceeds will fall short of the debts owed. However, many lenders will often still agree to a short sale over foreclosure.

Many situations qualify an individual for a short sale. For example, a short sale is possible when home sellers face:

  1. A decreased market value
  2. A default on their mortgage
  3. Financial hardship

Many times, these circumstances are out of an individual’s control. But the option of a short sale can help ease the financial stress that homeowners face.

Homeowners will have to prove financial hardship

When individuals pursue a short sale, there are many steps they must take throughout the process. One of the critical steps is submitting a hardship letter. This letter gives home sellers a chance to explain to their lender:

  • Their individual financial circumstances; and
  • The reason for pursuing a short sale.

Individuals should ensure that they write a formal, factual letter. Dealing with financial hardships can be incredibly emotional and stressful, but individuals must make sure that they approach this situation with careful thought and precision.