First, a disclaimer.  I cannot stress this point enough: consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.

In just the last two weeks, I have received phone calls from three people who were considering a short sale.  Each has his/her own reasons for investigating the possibilities.  The usual reasons include large negative monthly cash flows and a desire to avoid foreclosure.  Here are three things many lenders look for when considering a short sale request:

• Financial Hardship - is there a verifiable reason that has or will cause you to miss a payment.  Examples that qualify are mortgage payment adjustment, a job loss, too much debt or a business failure.
• Monthly Shortfall – lenders need to be convinced that you cannot afford to pay your mortgage.  You will be required to provide a financial worksheet that demonstrates this fact.  The shortfall equation is simple:  total monthly income – total monthly expense = monthly shortfall.
• Insolvency - you must be able to prove that you owe more than you have in cash.  Insolvency can be proven in many cases, even though you may still have some money for living expenses.

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