FHA Short Sale Guidelines

  • You must list the property with a licensed real estate broker who is not related to you.
  • You must be at least 31 days delinquent when you sell the home.
  • You have to keep the house on the market for at least four months, possibly as many as six
  • For the first 30 days of marketing, the short sale lender (mortgagee) may only approve offers that will result in a minimum net sale proceeds of 88% of the "as-is" appraised Fair Market Value (FMV). During the next 30 days of marketing, the lender may only approve offers that will result in minimum net sale proceeds of 86% of the "as-is" appraised FMV. For the rest of the marketing time (60 days), the lender may only approve offers that will result in minimum net sale proceeds of 84% of the "as-is" appraised FMV.
  • The home must be owner-occupied; exceptions are made for death, divorce, unemployment, or job transfer.
  • Realtor commissions cannot be more than 6%.
  • You have to be pre-approved in order to be qualified for a short sale.
  • HUD will do an appraisal to determine what the market value is.
  • HUD will notify the Broker of what they are willing to accept as a pay off.
  • There must be documentation proving your decreased income or inability to make the mortgage payments.
  • HUD will reimburse the buyer for up to 1% of the mortgage as part of closing costs if the new mortgage is also FHA-insured.
  • HUD will not pay for points, home warranties, or lender’s title insurance.
  • All short sales must be “arms-length” transactions.
  • HUD will pay the lender up to $1,000 if the sale is closed within 3 months from the date of application
  • HUD will pay up to $1,500 for the discharge of secondary liens after the primary lender’s incentive has been applied.
  • The borrower must not be encouraged to default on their mortgage in order to participate in the short-sale program.
  • The property may not be an investment property

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