There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a "short sale."
A short sale happens when the lender is shorted on a mortgage, meaning the lender accepts less than the total amount that is due. If your mortgage is $100,000, but your home is worth, say, $90,000, you are $10,000 short, not including costs to close the sale such as, real estate commission, recording fees or title and escrow charges.
Sometimes, to avoid going through the costs of foreclosure, a lender will sanction a short sale by letting a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure. A short sale in real estate is not always a pleasant transaction.
Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, that your real estate agent should assist you providing.
If you are in financial hardship, unable to work with your lender on a loan modification, it is recommended to talk with a real estate agent to determine if selling your home is the best option even if a short sale is required. When talking with the agent, be sure to be upfront with your situation. That is the only way to get the best advice possible.
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