What Is A Short Sale?

Some people facing foreclosure simply cannot make their monthly mortgage payment and they cannot pay a lump sum to catch up. Their only option appears to be to let the foreclosure process run its course and lose their home at the end.

Then someone steps forward and offers to buy their home. The only problem, the prospective buyer will not pay an amount needed to payoff the existing mortgage.

If this happens to you, you can contact your mortgage lender and ask them to accept the lesser amount. You are asking them to accept a short sale. In other words, a short sale is when a lender will allow you to sell your home for an amount short of (less than) the amount actually owed on your home loan. For example, you may owe $100,000 and your lender may accept $95,000 to satisfy the loan.

Short sales can be beneficial to lenders because it can save them the costs of the foreclosure legal process, the costs of maintaining an empty house, and the uncertainty of the time and price of selling the home after the foreclosure. However, lenders are not required to accept a short sale.

Sometimes, lenders will accept a short sale only if you agree in writing to pay the lender more money. For example, you may owe $100,000 and the proposed short sale may be for $95,000. The lender may require you to promise in writing to pay the balance of $5,000 ($100,000 less $95,000).

Often, lenders will require that you submit certain documents to them before they will consider a short sale. Most of the time, the lender will want to make sure that you, as the seller, will not receive any money from the sale. The mortgage lender believes that, if the lender is going to receive less than the amount it is owed, you shouldn't receive any money from the sale.

The bottom line is that, if you have a buyer for a short sale and your lender agrees to the short sale, be absolutely sure that you understand what you are agreeing to. You don't want to have a short sale and think that your debt is satisfied, and then find out later that you still owe money to your mortgage lender. It is a good idea to have a licensed lawyer review all documents.

This article is general information. If you have any questions of any nature about stopping or avoiding foreclosure talk with a lawyer licensed in your state.

Stop! Don't blindly chase any option to stop foreclosure. See stop foreclosure options to learn what options you have in your situation. Remember, what works in one person's situation, may or may not work in your situation to stop, avoid, and prevent foreclosure. For more general information, see Stop Foreclosure - Five Options You Need To Know.

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