Should You Short Sale Your Home?

Are you a homeowner facing a financial situation that has spun completely out of your control? If so, one answer to an irreparable financial problem is to short sale your home as a means to find relief from an important debt obligation. Essentially, a short sale denotes that you have located a purchaser who is agreeable to buying your home for a value less than your mortgage’s remaining balance. Your mortgage lender loses money on the deal as do you; however, a short sale is a decision that your mortgage lender may agree to provided that you have first done your research thoroughly.

Why would a mortgage lender agree to take a loss on the sale of your residence? Clearly, if you can persuade the mortgage lender that you are desperately behind on payments and that you have no prospect of being able to make future payments, then you are a chief contender for a short sale. As the foreclosure process is a costly one, your mortgage lender will in the end have to subsidize your vacated home.

With a short sale, your mortgage lender may be glad to avoid costly lawyer fees plus not have the uncertainty of a possible later bankruptcy on your part and the delays that can happen with that sort of determination in their laps. In addition, eviction expenses and the responsibility of having to administer and eventually dispose of your home are other burdens they may not want to have. Ultimately, a foreclosure could cost your mortgage lender more than ten thousand dollars, money he certainly will not recoup if you later declare bankruptcy.

Your mortgage lender may consider your short sale plan if the price the new owner proposes to pay for the house is close to its actual market value. However, if the price offered is considerably less than the home’s worth, then you must convince the mortgage lender that it is still in their best interest to go ahead with what is a certain sale versus their being saddled with the task of having to administer a hard to dispose of and costly piece of property. Remember: mortgage lenders are in the business of financing property, not managing it.

To win your crusade, you may have to provide compelling evidence that the home requires wide-ranging repairs, that the local employment and/or housing market is distressed, or you may have to come up with some other persuasive explanation as to why the mortgage lender should agree to your short sale.

On a personal level, a short sale is preferred over a foreclosure since with the latter decision your credit is left in shambles. With a short sale, you can mend your damaged credit standing faster and get back into the housing market quicker once your financial picture has cleared.

Yes, a short sale is a radical response that should only be exercised during a time of complete desperation. Your mortgage lender is not required to accept your proposal, but a compelling line of reasoning on your part may just tip the scales in your favor.