SHORT SALE
A Short Sale is another option for people who are facing foreclosure. A short sale means the lender will accept a discounted payoff to release an existing mortgage. So if a lender agrees to do a short sale in real estate, just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the homeowner accepts it. The lender has the final say in the process.
If there are two loans on the property, you could have a problem. If a homeowner owes $160,000 on the first mortgage and $40,000 on the second, offering $160,000 leaves no money for the second lender. The first will have to cooperate with the second by offering a financial package to gain its cooperation.
Be aware that the homeowner need not be behind in payments before a lender may consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the property in line with market value, but not below it.
Special notes:
It is advisable during this process not to sign any documents you don’t understand. Always remember that signing over your deed to someone else might not relieve you of your loan obligation. Be sure to check out any company that promises to help you before you use them. You need to work with a reputable organization during this time, and you should beware of scams. Always check with a lawyer before entering into any transaction concerning your home.
As a last resort, and there are no more available options, you may be able to voluntarily “give back” your property to the lender. This is known as “deed in lieu of foreclosure.” This will not save your house but it may be less damaging to your credit rating.