Most lenders will consider allowing a Short Sale if there has been a change in circumstance after the loan was initally obtained which prevents the borrower from making payments.
Some of the possible reasons:
- Loss of income
- Divorce
- Job Transfer
- Medical Bills
- Mortgage Rate Reset
The lender will want a Hardship Letter explaining what happened to cause the inability to keep up with mortgage payments. An unsatisfactory reason would be “the market has declined”.
If a seller has substantial savings, the lender may ask for a “contribution” to offset some of the loss. Additionally, the lender may ask for a “promissory note” if the borrower shows a good income stream, often at a favorable rate and terms, such as 0% interest over five to seven years.