BIC TIP #1101: Short Sales Are for Genuine Hardship Cases Only
Short sales can be a valuable resource in real estate, but they are often misunderstood. A short sale is not simply a way for a seller to avoid bringing money to closing. It is a hardship-based solution, and the seller must truly lack the funds or resources needed to satisfy the mortgage balance.
In a true short sale, the lender agrees to accept less than what is owed, and that agreement is only granted when the seller demonstrates legitimate financial hardship. This typically includes situations such as job loss, medical issues, divorce, death of a wage earner, or other verified financial setbacks. The seller must show that they have no means to contribute—including savings, retirement accounts, gifts, or other accessible assets.
As agents, it is our responsibility to understand these requirements and set proper expectations. If a seller has the funds or the ability to obtain them, the lender will require those funds at closing and will not approve the short sale. Always verify the hardship, communicate clearly with the lender, and ensure your client understands the documentation they will be expected to provide.
Short sales can be lifesavers for the right clients, but they must meet the criteria. Hardship first, documentation second, approval third.