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Short Sale

How does this program help me?

A short sale is when you sell your house for less than what you owe on it. The difference between your sales price and what you owe is written off by your lender as a loss. Your lender will have to decide if they will accept the short sale or if they would rather take the house through foreclosure proceedings. However, a foreclosure is an expensive process and a short sale will often be approved by a lender if it will cost them less than the foreclosure will.

A short sale will usually reflect as "settled for less than full balance" on a credit report as opposed to "foreclosure". There are some opinions that this will lessen the impact on your credit scores but keep in mind that there is no concrete proof of this, and you should view that opinion with skepticism. The main benefit is in the waiting period before you are allowed to buy another home. It could be considerably less with a short sale than if you have a full foreclosure on your credit rating.

Who should I contact?

It is imperative that you deal with someone that has experience with short sales! You want to speak with a local Realtor that is familiar with the short sale process. Call around and interview local Realtors to be sure they have experience with short sales. Ask friends and family for referrals. The Realtor will price the house, liaison with your lender and prepare all the paperwork. The best part is that your lender is the one that will wind up paying the Realtor's fee once the house sells (since it is selling for less that what you owe, the Realtor's fee is added to the loss the lender is taking).

In addition, we highly recommend that you get a consultation with a real estate attorney and/or a bankruptcy attorney about the legal differences between a short sale and a foreclosure. There are significant differences and ramifications between the two and each has different protections from the lender coming after you for their losses at a later date! Click here for a nationwide lawyer referral service or ask friends and family for recommendations. Also, talk to your accountant/tax preparer about the potential tax consequences!

What should I expect?

A Realtor will usually suggest that you get the house on the market first and then apply for the short sale once you have a firm offer. Your offer, a hardship letter and all your personal financial documents will be sent to your lender. The lender will then decide to accept the short sale offer or counter your buyer to a higher sales price. Remember, it is really the lender that owns the home so in reality they are the seller. Don't try to sell the house for too low a price just to get a quick sale. Your lender will likely reject your buyer for offering below market for the house.

Short sales will usually take 45-60 days to process once you have an offer. How long it takes to get an offer is dependent on your local real estate environment.