Federal Housing Administration (FHA)
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Is an FHA Short Sale right for you?
If you're facing financial hardship and we have evaluated you but you do not qualify for an FHA modification, a short sale may allow you to settle your home loan debt and avoid foreclosure.
You may be eligible if you meet all the following criteria:
- You have only one FHA-insured loan
- You're experiencing a permanent financial hardship such as reduced income, medical expenses or divorce
- You live in the house, unless you left the property for the same reason you can't make payments
- The house wasn't purchased for rental or used as rental for more than 18-months
- You're able to offer a clear title to the property with no liens from any other parties
- You're unable to modify your current home loan, or don't wish to remain in your house due to other circumstances, such as a job relocation
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If you're eligible, you may be able to start the short sale process right away. However, in most cases, FHA requires that we evaluate whether you are eligible for a loan modification or other home retention options first. So your Customer Relationship Manager will probably ask you for updated financial information and additional documents.
If we authorize you to start the short sale process, we'll arrange an appraisal of your house (at no cost to you) to determine its current fair market value. You'll receive the FHA "Approval to Participate" letter, with the minimum sale price for the property. You then must sign and return this letter to us within 10 calendar days. The property must be listed for sale with a licensed real estate broker/agent unrelated to you within seven calendar days of your receipt of the letter. We recommend working with a real estate agent experienced in short sales who understands the process.
If you have a Bank of America home equity loan or home equity line of credit, we'll take care of getting approvals for your short sale. If your loan or line of credit is with another lender, you must contact that servicer and request a Second-Lien Release.
Typically, you'll have 120 calendar days to market the house and get an offer. You're required to maintain the property in ready-to-show condition at all times. Your agent must submit all required documents on time. You can't sell the house to a family member or anyone else you have a personal connection with (also known as an arm's-length market transaction). If your house is unable to be shown or sold because of an unexpected circumstance, such as damage from a tornado or flood, please call us immediately.
Once you receive an offer, your real estate agent will submit a copy of the executed sales contract and all additional documents. To make sure your short sale is completed successfully, your agent must submit any requested documents on time and respond quickly to any counteroffers.
If the offer is accepted, we'll send you an approval letter releasing the house for purchase. With everything in order, final documents will be prepared for closing. You'll receive a letter outlining the details of the sale and a set of documents that must be signed, notarized and returned to us before your short sale can be completed. As with the sale of any house, unless otherwise approved by us, you will need to move out on or before the closing date.
At the closing, you could receive up to $3,0001 to help with moving, rental and other relocation expenses. For tax purposes, relocation assistance paid at closing is considered income. Please consult a tax advisor for more information on how this could affect you.
Once the sale is finalized, your mortgage and any other loans against the house are settled from the proceeds of the sale.
If we forgive any amount of mortgage debt, there may be possible tax consequences. Please consult a tax advisor for more information about how this could affect you.
We'll report the sale to the major credit reporting agencies as completed for less than the amount owed.
What if I'm not eligible or get declined?
If the FHA doesn't approve your short sale request and you can't maintain ownership through an FHA loan modification, a deed in lieu may be possible. Otherwise, normal servicing of your loan will continue and may include foreclosure, subject to applicable law.
800 669 6650800 669 6650 Monday - Friday 8 a.m. - 8 p.m. Eastern
Help is available in English, Spanish and many other languages
1 The relocation assistance payment is calculated based on the appraised value of your property and the program rules. The total amount will be no more than $3,000, if you qualify. The payment will be delivered after the closing if you comply with all terms and conditions of the program, which include but are not limited to the following: a valuation of the property must be completed and you must satisfy all subordinate liens and provide clear title for the property. If you are still responsible for a deficiency balance after the sale, you should be aware that this relocation assistance will increase that deficiency since it reduces the amount available to apply towards your mortgage debt. If you do not comply with all terms and conditions of the program, you will not receive the relocation assistance payment. The amount of any relocation assistance will be reported to the Internal Revenue Service (IRS) on the appropriate 1099 Form or Forms. We suggest that you contact the IRS or your tax preparer to determine if you have any tax liability. In order to receive the relocation assistance, the sale of the property must close by the closing date in the short sale agreement. Bank of America reserves the right to change or alter the relocation assistance at any time.