If you are facing a potential foreclosure, you have an option you might not be aware of. It’s called the short sale, and it permits a homeowner to sell their property for less than the outstanding mortgage balance. Short selling a home is a fairly straightforward process, but it requires approval from your lender. If the market value of your home has declined and you are under significant financial stress, short selling might be the best choice for you.
It‘s the same as any other sale, except a third party is involved. Short selling isn’t all that much different from listing a home any other way. You, the homeowner, will list the home alongside a listing agent and wait for the market to work its magic. If you’re lucky, it won’t be long before interested buyers come knocking. However, there is one additional party involved in the process than there would be if you were selling a home in the traditional way. Your lender must be involved, too.
If a sale is successful, your lender will forgive your debt. Ideally. In the best-case scenario, your lender will forgive any remaining mortgage debt upon the sale of the home. If you used a trusted lender you are not likely to run into any problems. On the other hand, some former borrowers have found bills arriving at their new place of residence weeks or months after their short sale demanding they pay up. If you’re considering a short sale, consult an attorney to ensure that the short sale agreement actually removes all existing liability—and won’t come back to haunt you.
Short sales leave you in control. If a foreclosure is impending, you may wish to opt for a short sale instead so you can maintain some control over the situation. There’s a reason foreclosure is a dirty word—it entails seizure of the property and eviction. If you can short sell your home instead and walk away with some money in your pocket, that’s preferable. A successful execution of a short sale can actually help pull you out of a seemingly hopeless financial crisis. Short sales also typically incur fewer penalties and legal fees.