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Short Sales 101: What You Need to Know

Guest post by: Bud Gragg

Article Overview: In today's housing market, short sales are just starting to look better to lenders, and the federal government has even chipped in with a program to speed them up. But what are short sales, and how can you use a short sale to avoid foreclosure when you're behind on your mortgage?

Short Sales 101: What You Need to Know

In today's housing market, short sales are just starting to look better to lenders, and the federal government has even chipped in with a program to speed them up. But what are short sales, and how can you use a short sale to avoid foreclosure when you're behind on your mortgage?

In a short sale situation, your mortgage lender agrees to accept what's called a “short payoff”—this means that the bank or other lending institution will accept less than the amount you owe when you sell your house.

This option can be a real boon to both the lender and the homeowner. The lender doesn't have to deal with the costs involved in foreclosure, and the homeowner doesn't have to take as much of a black mark on their credit rating.

But there's nothing short about a short sale. For one thing, most lenders are still leery of them because with a short sale they give up their ability to keep milking you. And with banks owning about 1.1 million homes now, there's going to be some competition to sell yours.

It can also be complicated if you have more than one mortgage on your house, and the different lenders won't agree on the amount each lender will accept.

So how does all of this affect you? If you are in an underwater mortgage or have another situation that makes it hard for you to keep making mortgage payments, a short sale may be just the thing that can save you.

Here's what you need to do:

First, hire a Certified Realtor to negotiate your short sale with your lender and handle the deal for you. Short sales are very special deals and require special training— Kristin and I are Realtors, and even we had to study the details to do our own short sale! Feel free to contact us and we’ll be happy to help you locate a Realtor who is a true short sale specialist in your area.

See if you can get your lender to agree in writing to accept a short sale. Don't trust anything the employee of a bank tells you. In addition don't let your lender dictate what your house sells for, and don't let your lender choose your Realtor for you. A good short sale Realtor will be able to accommodate all of this for you.

You're going to have to provide your lender with a lot of documentation, for example, proof of your financial distress and the actual value of the house.

Finally, through a short sale you may be able to sell your home to a cash investor who will allow you to stay and rent the home you just short sold. — Kristin and I are now renting our house from the person who bought it in our short sale! And we're paying about half of what we did for the mortgage every month! What a concept!

You also need to be aware that there's a federal program that began in April to help facilitate short sales. This program, called Home Affordable Foreclosures Alternatives, or HAFA, went into effect on April 1^st. The program is geared to speed up short sales, provide some money to homeowners for relocation, and make it easier to do short sales even when there's more than one mortgage involved.

However, not all banks are participating yet. Finding out if your bank is one of them is something your Realtor can help you with when putting together your short sale.

Short sales are a good way to avoid foreclosure. They cushion your credit a bit as opposed to the hit you take with a foreclosure, and you can walk away knowing you did everything you could to make good on your obligation. However, if your lender or lenders won't allow short sales, remember that foreclosure is also an option to consider.

Again, please feel free to contact us so we can help you navigate your way to an educated short sale Realtor.

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Referred by: http://www.meetkarennewman.com/



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