Short Sale Information and Advice

You are not alone in this situation. Many people are finding themselves in an "upside down" situation. A short sale is a process in which the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. The lender would much rather see you sell the property than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process.

Generally speaking, a short sale occurs when a homeowner who is behind on his or her mortgage payments, and who owes more on his home than it is currently worth, contacts the mortgage lender asking the lender to allow him to sell the home for less than the balance of the mortgage. For example, if you owe $100,000 on your mortgage, but are only able to sell your home for $80,000, you would need to have your mortgage lender agree ahead of time to allow the sale to proceed. In fact, there is little use in putting your home on the market until you, or your attorney, have spoken with your mortgage company's loss mitigation department to discuss proceeding with a short sale. Many lenders will authorize short sales in an attempt to prevent property from falling into foreclosure; however, some lenders will not allow short sales to proceed.

Usually, no lender will authorize a short sale unless the borrower is already in arrears on his mortgage, as the lender will see this as evidence that the borrower can no longer afford the home. In addition, your mortgage lender's loss mitigation team will probably want to see documentation of your income and assets to verify that a financial hardship exists and that you truly cannot afford the home.

Here are your other options:

Foreclosure Mediation to Stop Foreclosure

This service negotiates with the lender to repackage the loan so that the borrower can become current again. It will help save your credit, keep you in your home, save your home equity and appease your lender. This process has to happen pretty quickly, and could involve one or more of the following:

a) Loan modification

b) Payment forbearance

c) Loss mitigation

Deed in Lieu of Foreclosure

This is where you are unable to pay for the house and you voluntarily give the house back to the lender. This is subject to a deficiency judgment yet counts as a "less serious" foreclosure on your credit. However, you lose your greatest asset, your home. Also, not every lender will always accept this arrangement.

File for Bankruptcy