Late on your mortgage with a short sale. Is it a MUST?

Is it a must to be LATE on your mortgage payment to SELL your home on a short sale?

I've been on several listing appointments in the past 2 weeks where the owners of the home need to sell but are not late on their mortgage. What's the correct answer? Well, just like everything, the answer is not black and white. I will typically try to hit on several points that show both positives and negatives to both sides that should allow the seller to make their own decision.

Let's be honest, no matter what the situation is for the seller, a short sale is not a guarantee. It is entirely up to the seller's lender. There are not any ways around this. If the lender is not going to approve the short sale, it is not going to sell. There is one exception to this that I can write about later but I would never advise a homeowner to take that particular course.

Some lenders are not willing to look at accepting a short sale unless an owner is late on their payments. Those are just the facts. Most lenders are willing to look at a short sale if the owner is late. The reason for this is because no payments will eventually initiate the foreclosure process. We know the lender doesn't want to own the home.

A late payment will most certainly have a negative impact on the seller's credit. That is no secret. A 30 or 60 or 90+ day late flag is a problem. I ask the owner to think if their current situation is better than what it would be if they didn't have this house anymore. Some sellers cannot afford the home, or are just hanging on by a thread trying to make the payments. Sometimes the answer is of course, they are willing to have some dings on the credit to be more comfortable.

Of course, it never hurts to try to work with the lender to accept a short sale when the owner is not late. The worst they can say is no. If the lender does say they are not going to accept the short sale because of that specific reason, we know what the answer. At that point, the owner can then make a clear and concious decision of if they should be late or not in order to sell the home.

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