Short Sales in Real Estate

The current recessionary economic crisis triggered by the housing market failure has led to historic foreclosures of unprecedented proportions. The real estate industry has been rocked and brought to its knees by the new wave of consumer behavior characterized by mortgage defaults and reluctance to purchase new homes. This has also led to massive devaluation of real estate, making it extremely hard to even sale a house at its appraised value! Many homeowners are exploiting short sale options as a means of avoiding embarrassing foreclosures.

A short sale in real estate means that a homeowner pleads to his mortgage company to have it settled at a cost that is less than what is actually owed. Even though not all mortgages qualify for short sales, this is definitely a viable option for a borrower with unexpected extenuating financial circumstances that would hinder him from making regular mortgage payments. The short sale might not rid the borrower of the debt but it could prevent heartache in times of bankruptcies and other financial difficulties.

The first step in considering a short sale is to contact the lender with the issue and determine whether it’s wise to proceed with the sale. One will be required to submit a letter of authorization to release private information to other relevant parties as well as a preliminary net sheet, a hardship letter, proof of current income and assets, copies of bank statements, comparative market analysis and a copy of the purchase and listing agreement. At this point, one can only pray and hope for the lender’s positive response. Definitely this transaction will lower the borrower’s credit score but one can plead with the lender not to report it to the credit bureaus. However, it’s at the discretion of the lender to make that decision.