When you fear losing your home to foreclosure, a short sale may be a possible solution. A short sale is a lender-approved alternative to foreclosure that allows for the property to be sold at a loss.
Short sales are often sought when a homeowner is unable to keep up with mortgage payments, yet lacks the positive equity in the home necessary for an outright sale of the home. This normally occurs when housing markets deteriorate. Lack of a substantial down payment or the cashing out of equity through home equity lines of credit can also contribute to negative equity.
A short sale requires written lender approval. The lender must approve the final sales price before the buyer may close on the sale.
A short sale is essentially a pre-foreclosure sale in which a deficiency balance will result. There are limits on how much of a loss a lender is willing to accept. Due to the length of time it takes to list, market and sell a home, a lender may grant an additional several months to allow you to pursue a short sale. If you are unable to negotiate a short sale to a buyer, the lender may proceed with the normal foreclosure steps.
Some real estate investors specialize in short sales. These bargain hunters know that they can likely rent the home to prospective tenants and later sell the home when its value increases for a profit.
A short sale is generally preferable to foreclosure. Still, there may be other options for you to cure the default. These option for mortgage help may allow you to remain in the home and repay your debt under improved terms that more closely reflect your ability to pay.
Prior to pursuing a short sale, it is recommended that you complete mortgage default or loss mitigation counseling through a HUD-approved housing counseling organization. If you still decide to pursue a short sale as a solution, you should consider getting assistance from an experienced real estate agent who is familiar with the process.