Short Sales

If you’ve missed a few mortgage payments and are worried about foreclosure, consider a short sale as an alternative solution to your financial problems. It’s by no means ideal, but if you do it right, a short sale can work in your favor.

With a short sale, you sell your home for less than what you owe the bank. You then use that money to pay off as much of your mortgage as possible and the bank will dismiss the rest.

If you bought your house at the height of the market, you may have negative equity. The falling house prices have left a lot of people unable to refinance because their home is worth less than the remaining mortgage debt.

The only party who wins in a short sale is the buyer, who gets a good deal on a house. But even then, he may have problems with the condition of the property. People who are worried about foreclosure don’t spend a lot of money on the up-keep.

The bank loses money on a short sale when it forgives part of the mortgage debt. Still, it’s preferable to foreclosure.

As the seller, you will not only lose your home, but damage your credit score (though not as much as with a foreclosure). But if you’re struggling financially, chances are that your credit history is already damaged.

If you’re considering a short sale, the first step is to contact the lender. You will need to write a hardship letter and submit proof of income and assets. You’ll also need a comparative market analysis that shows that you cannot sell your home at a price that will cover your debt. A real estate agent can prepare it for you. It’s a good idea to hire a competent real estate lawyer to advise you during the short sale process.