Short Sale

If you cannot afford to pay your mortgage, or you cannot sell your home for the amount that is owed on your loan, you can consider a short sale.

A short sale is selling your home for less than the loan on it. The lender will have to agree to allow a homeowner to do this type of sale - basically the bank must be willing to take an amount less than what it is owed in satisfaction of the loan, agreeing that the homeowner will no longer owe any amount on the loan once the short sale is completed.

In order to do a short sale the homeowner must have some kind of special circumstance affecting his or her ability to make the mortgage payments. Simply saying that you can no longer afford the interest rate is not going to cut it. The homeowner is asking the bank or lender to take a loss so the excuse better be a good one. Short sales are approved a lot of the time because the lender would rather take a loss on the loan than see the house go to a foreclosure sale and end up owning the property itself and trying to sell it for even less.

The homeowner has to get an appraisal done on the property to prove that the house is worth less than the amount owed to the lender for it. Sometimes the bank or lender will then set a specific price that the house must sell for in order for them to accept the short sale. Most times the house goes up for sale like any other property and buyers will make an offer on it hoping the bank will approve their offer. This is the reason short sales are known to take forever to close. A lender may take its time in considering an offer since it is accepting a loss on the note (the promise from the borrower to repay the loan at a specified amount).

Short sales are a great option to avoid foreclosure because they do not have an effect on your credit like a foreclosure does!