Not every property qualifies for a short sale. If you are thinking about doing a short sale, here are some considerations:

If  I am in trouble financially, should I start by pursing a short sale?The first step is to talk to the lender and explain the problem and explore alternatives. These might include adding any delinquency to the end of the loan, changing the terms or additional payments. One resource is the free Hope Now Hotline. This is the group of HUD-certified counselors who help those in trouble on their mortgages. Their web site is and their phone number is (888)-995-HOPE.

What if my property is in foreclosure?There must be enough time left to list the property, draw an offer, get the short sale approved AND get the deal closed. Generally speaking, lenders are reluctant to delay a foreclosure. They are more likely if a seller has an offer in hand.

What if I am current on my payments? Generally speaking, lenders don't consider a short sale until payments are delinquent.

What kind of hardships do lender consider to justify a short sale? In general, a lender requires a showing of a substantial hardship on the part of the seller to justify a short sale. Often accepted examples include a job loss, a death, illness, divorce, or a disability. Lenders may consider a job transfer as justification. Usually, just being upside down on a property is not enough.

What is the impact of multiple loans or other liens on a short sale? They make it much harder to get approval. Remember, each loan and lien holder must approve the short sale. Often, a second mortgage or other lien holder has little incentive to cooperate and won't.

Why should I consider a short sale? Short sales and foreclosures have the same general impact on the seller's credit score. The primary difference is that a short sale typically allows a seller to get another mortgage for another home in 2-3 years. A foreclosure's impact last 5-7 years. Thus, a short sale enables a seller to buy another home much quicker. If the lender also agrees to waive the deficiency on the loan, it may also protect the seller from future collection activity.

Is the debt forgiven in a short sale taxable? The Mortgage Forgiveness Debt Relief Act of 2007 allows a loan forgiven to not be taxed if the amount was used to buy, build or improve the property. Cash-out loans for other purposes may not qualify.

Who should I consult with? The advice of an attorney and /or accountant is recommended.