Phoenix Short Sale Approvals - What Do Banks Look For? 

 

When a bank is looking at whether to approve an Arizona short sale, they look closely at two things.

  

Demonstrable Financial Hardship

 

First, does the seller have a "demonstrable financial hardship." The seller will have to show proof of this hardship through financial records, employment documentation, as well as a signed letter that will all be submitted to the bank for review during the short sale process.   

  

So what is considered an Acceptable Financial Hardship? 

 

A financial hardship is:  A substantial change in a homeowners financial situation that will prohibit or affect their ability to pay their mortgage.  Below is a list of the most common financial hardships banks are currently seen in today's market:

• Job Loss
• Failure of a Business
• Divorce
• Severe Medical Illness
• Forced Job Relocation
• Death of a Family Member or Spouse
• Inheritance
• Unexpected Medical Bills
• Extended Service in the Military
• Mortgage Interest Rate Adjustments/Payment Increase
• Income Reduction
• Separation
• Excessive Amount of Debt
• Incarceration

Financial Resources 

 

The second item that a bank will look closely at is, the seller's ability to pay down the loan.  Does the seller have liquid cash or assets that they could use to buy-down their loan?  If they do, the bank will most likely expect the seller to use some or all of these funds to do just that.  A bank is only going to approve a short sale for a seller who can demonstrate that they are insolvent, meaning that they have a large amount of debt with no ability or resources to pay on that debt.  This only makes sense though, a short sale is not a way to just "get out" of a mortgage, it is a last resort tool that a homeowner can attempt when they truly can't pay their mortage.