Financial Hardships That Qualify For A Short Sale

If you’re struggling to meet your monthly mortgage payments, you’ve probably thought once or twice about selling your home. However, if your home isn’t worth as much as you paid for it, you will need approval from your lender to list it as a “short sale.”

A short sale occurs when your sale price isn’t enough to cover your mortgage debt. If you can’t cover this shortage out-of-pocket, you’ll need an attorney to negotiate with your lender to forgive the debt.

Although fairly common, short sales are serious transactions and affect your credit score and future buying power. As bleak as that sounds, a short sale is still far less impactful than a foreclosure

Where to Start

To explore if a short sale is right for you, contact a real estate agent or broker who has extensive short sales experience. (Do not discuss a potential short sale with your lender!)

Your real estate broker will meet with you and run a comparable market analysis (CMA) for your property. If your expected sale price isn’t enough to settle your mortgage debt – you will have to “sell short.”

Your broker will then connect you with a specialized attorney and short sales negotiator. 

Don’t hesitate to make these connections because you can’t afford them. You won’t pay for any of these services out-of-pocket; your lender pays them through the sale of your home. This is standard practice and lenders expect to pay for these services. 

Your short sale attorney will give you a list of documents that they’ll need for the Short Sale Proposal to your lender. They’ll also handle all the negotiations and see the transaction through to the very end.   

Arguably the most important information that the lender requires is proof of your hardship.

Business woman who just lost her job

The Hardship

A hardship is a situation that prevents your ability to pay on your loan and debt obligations. It’s something that is out of your control and changes your financial circumstances for the worse. 

Any of the following life events may qualify as a financial hardship to a lender:

  • Job loss
  • Reduced income due to circumstances beyond your control 
  • Divorce or separation
  • Death of the homeowner or an immediate family member 
  • Illness or medical emergency
  • Job transfer
  • New variable loan rate kicked in
  • Natural disaster
  • Unexpected and/or major home expenses
  • Extended military service

Many of these life events are perceived as out of your control.


Hardship Examples

One example of an easily proven hardship is when the income-earner in your family develops a severe illness, causing them to reduce their hours at work. 

Same goes for the individual who is being transferred to a different office due to budgetary cuts.

Lenders will want to understand how the hardship arose, and if you’ve tried everything in your power to avoid or resolve the issue. 

For instance: Is your job transfer voluntary or involuntary? If you know that your home won’t fetch a sales price high enough to cover your mortgage, why would you voluntarily transfer? 

Are you just looking for a change of scenery? If so, your lender may not be amenable to a short sale and your only option may be to rent out your property.

However, if your voluntary job transfer includes a promotion and salary increase, no lender could ethically deny you the chance to improve your career outlook and financial circumstances. 

Similarly, if your current position at work is being phased out and you need to secure a job transfer before you’re given the pink slip — your lender may be willing to work with you on a short sale.

dad on laptop with 2 kids surrounding him

The Hardship Letter

Lenders will want to read about your hardship in a straightforward, one-page letter. (Your attorney will guide you through this.)

Your hardship letter would detail:

  1. How you encountered a hardship that was beyond your control
  2. What you’ve done to try to resolve or alleviate the hardship
  3. Why your local market has not upheld your original house value

Whether the entire country is experiencing home value depreciation or it’s only your local community, you have very little control over these trends.

In the end, your bank approved your original loan amount based on a professional appraisal and market conditions at the time of purchase.



Hardships can happen to anyone, for any reason. Millionaires have been approved for short sales. And people who arguably have had control over their dwindling financial circumstances have been able to modify their mortgage and avoid foreclosure.

It’s all about the lender’s perception of your hardship and if they understand that an urgent resolution is needed in order to avoid foreclosure.

If your situation is not as cut-and-dry as the qualified hardships mentioned above, consider meeting with an attorney to discuss the likelihood of a successful outcome.


If you live in the Washington, DC metro area, call Marc Dosik and the Fed City Team to discuss your options for a short sale. Marc and his team have rescued over 130 home owners from foreclosure proceedings. They help you sell your home and work with your lender to get the mortgage deficiency forgiven, all at no cost to you. They even negotiate with the lender to pay your relocation costs, giving you $3,000 or more cash-in-pocket to help you get back on your feet. 


Avoid foreclosure. Contact Marc Dosik today!


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Want to learn more about the short sale process?

Download our FREE ebook:  How to Sell Your House in a Short Sale. Get your copy today!


Disclaimer: Every homeowner’s situation is unique, and local, state and federal laws change regularly. As such, this information should not be considered as legal, tax, financial or investment advice. Consult a qualified professional before making any financial decisions.

About the Author
Marc Dosik
Marc is the Associate Broker and primary decision-maker for Fed City Team. He's lived in the Washington DC metro area all his life and has been a licensed broker since 1998. Marc knows and understands the DC area market and specializes in contracts, negotiation tactics, grant programs for home buyers, short sales and foreclosures, and 1031 Exchanges.

If you’re selling in, or relocating to the DC area, contact the Fed City Team today.