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
- Severe Medical Illness
- Forced Job Relocation
- Death of a Family Member or Spouse
- Unexpected Medical Bills
- Extended Service in the Military
- Mortgage Interest Rate Adjustments/Payment Increase
- Income Reduction
- Excessive Amount of Debt
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.