One of the biggest personal and legal challenges you may face in your lifetime probably is about losing your home to foreclosure. Worrying about what can help you to avoid a foreclosure is another thing. One alternative is developing a plan of action to sell your house before you are sued in a foreclosure case. Some homeowners in your position pursue what is known as a “short sale.” A short sale involves selling the house below market price. Prior to putting the house on the market, the owner reaches agreement with the mortgage lender that any difference between sale proceeds and the outstanding loan will be forgiven by the lender, according to National Short Sale Center.
Write a letter to your mortgage lender explaining your desire to avoid foreclosure and sell your home. State that you believe the best way to accomplish this goal is through a short sale. Ask the lender whether a short sale is acceptable. Many lenders prefer losing some money on a short sale rather than spend what can amount to more money pursuing a foreclosure.
Request that the mortgage lender prepare a standard agreement that addresses the proposed short sale. The contract contains a specific provision establishing the bottom-line reduced sales price on the property. The contract also includes a provision stating that the proceeds from the sale of the real estate will fully satisfy your obligation under the terms of the loan. You are not responsible for any deficiency. A deficiency is the difference between outstanding balance on the mortgage loan and the money brought it from the sale.
Review the contract closely. Consider retaining a lawyer to review the agreement with you. Make absolutely certain you understand all terms in the contract.
Place the home on the market for sale, at the reduced price agreed to with the lender. Because the price is below fair market value, you enhance the chances that the property will sell sooner rather than later.
There are many options available to you, and selling your home may not be your ideal solution, but this could be the best way to provide the funds you need to pay off your current mortgage debt in full.