Every lender will have slightly different policies or rules about who qualifies for a short sale. Below are some typical requirements that need to be met to qualify for a short sale.

•The Home's Market Value Has Dropped. 
Comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. Prepayment penalties can be included in this balance.

•The Mortgage is in or Near Default Status.
Today's lenders now understand that many factors contribute to a potential default,especially in today's market. They are willing to look at options to avoid any future losses. 

• There Are No Assets. The seller will need to prove that they have no assets that can be used to pay the lender the difference. Lenders typically ask for financial statements, income tax returns and other financial documents to support the sellers claim.

•The Seller Qualifies For A Hardship.
The seller must submit a letter of hardship that explains why they cannot pay the difference due upon sale. Typically this letter will include why they has or will stop making the monthly payments.

It is important to keep in mind what constitutes a hardship. Below are some typical situations that are typically considered hardships.

1.Unemployment
2.Divorce
3.Medical emergency / sudden illness
4.Bankruptcy
5.Death

If these requirements are met, most lenders will agree to a short sale. With a short sale, both sellers and lenders do not stand to gain any profit from this transaction and most short sales are completed during the pre-foreclosure stage in order for the lender to avoid incurring further foreclosure costs.