Considering a Short Sale: Four Tips for Success

By Karen Lawson
Mortgage Credit Problems Columnist

You can't afford your mortgage payments, and can't qualify for refinancing due to your home's reduced value. A short sale, also called a pre-foreclosure sale, can help you avoid lingering bad credit associated with mortgage foreclosure.

Avoiding Foreclosure: How a Short Sale Works

If your home is worth less than you owe on your mortgage, your lender may agree to accept the proceeds of a short sale as full satisfaction of your mortgage debt. This process is called a short sale. Before asking your lender to agree to a short sale, here are some things you should know::

• Contact your lender immediately: There are no guarantees that you will receive an acceptable offer to purchase your home. The sooner you request your lender's approval to list your home at or below its current market value, the better your chances.for liquidating your mortgage debt with a short sale.
• Lender Motivation:Your lender wants to save money by accepting the reduced payout of a short sale and avoiding the projected cost of foreclosing. Avoiding taking your home into their inventory of foreclosed homes motivates enders to approve short sales.
• Expect a Complex Approval Process: Your lender may have to work with your mortgage insurance company and investors who actually own your mortgage. Criteria for approval typically includes your ability to prove (not just claim) a hardship beyond your control that makes it impossible to make payments.
• Cooperate Fully with Your Mortgage Lender: They may send real estate professionals and an appraiser to your home. Lenders request extensive financial documentation and a signed letter explaining your hardship and requesting a short sale. Failure to provide information can jeopardize approval of a short sale.

Time is important! The sooner you contact your lender, the more likely a short sale can help in avoiding foreclosure.

 

 

 

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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