Most lenders will not allow you to buy your own house in a short sale.
Arms at Length Transaction
To avoid scams or blatant conflict of interest, as part of the short sale process lenders require that the homeowner sign an affidavit of “arms length transaction”, which states that the parties are not related or business associates, and are each acting in their own best interest. It further states that there are no hidden interests between the involved parties, and that the seller will not be allowed to remain in the property once it is sold or regain ownership at anytime.
Alternate Options to a Short Sale
If a lender is willing to work with you there are alternative options that would be approved before resorting to a short sale. Under the Making Home Affordable (MHA) Program, new treasury guidelines have established home price decline protection incentives to encourage lenders to modify mortgages rather than force the homeowner to sell or foreclose. Mortgage lenders have the choice of participating in the new program.
Imminent Short Sale
If you qualify for a mortgage modification but miss payments during the trial period, your lender may opt to begin short sale proceedings. Under the MHA program guidelines, the transaction must be an arm’s length market transaction with all sale proceeds applied to the mortgage payoff. The new program offers a $1500 incentive to the homeowner toward moving expenses to encourage them to vacate more quickly.