Mission: Rescue Insolvent Homeowner

Are you finding it more and more difficult to pay your monthly mortgage payments on time? Are you struggling and afraid of foreclosure? If so, FEAR NOT, because a SHORT SALE, while not the most desirable, is much more desirable than a foreclosure.

Regrettably, foreclosures often occur due to unexpected events, such as a job loss or serious illness. And if the worst does occur, foreclosures are extremely damaging. Not only does the lender take your home away from you, but the lender has the option to place a judgment lien against you for the debt owed plus costs for the foreclosure auction. Your credit report will take a disastrous hit too. Those foreclosed on will take a hit of 200 to 300 points, depending on the overall condition of credit. This means that a FICO score before foreclosure of 680 could suddenly dip as low as 380. And to top it all off, buyers who want to buy another home after foreclosure will end up waiting at less 10 years before a lender will make a reasonable mortgage offer.

On the other hand, a short sale can save you from the worst of the worst. While a short sale will also adversely affect your credit score, perhaps even lowering it as much as 200 points depending on your credit condition and mortgage payment history, the effect of a short sale on a credit score can be overcome relatively quickly, especially if you keep a few credit cards and keep them current. On average, the short sale only remains on a credit report for 7 years. The owner must also keep in mind that they may be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In general, a trustee's sale wipes out the right to a deficiency; however, the lender does have sole discretion on whether to pursue a deficiency judgment. Probably the biggest advantage of a short sale is that the wait-time before buying another home is much shorter than those who foreclose. In fact, Fannie Mae guidelines allow short sale sellers to immediately apply for a new mortgage if the seller had kept payments current and had no 60-day late pays or greater on record.

Short sales are popular for the number of advantages it has over foreclosures. The biggest challenge you may face is getting your lender to agree to a short sale, though lenders have been more eager to agree as of late. The best solution will be to pursue a short sale as soon as you realize you are falling behind in payments and won't be able to catch up - the greater the amount you have in arrears, the less likely the lender will agree to a short sale.

To start the short sale process, the owner needs to present: a hardship letter, 2 years of tax returns, 2 year of W-2's, a financial worksheet, a signed authorization from lender, 2 recent bank statements, 2 recent pay stubs, and a list agreement with a real estate agent.


Because short sale laws and regulations differ from state to state and the benefits of a short sale will depend on your individual situation, it is very important to consult qualified professionals before making a decision. An experienced short sales agent with access to an experienced attorney (such as me!) who will negotiate for you with your lender is important and advised. And of course, follow the usual selling tips to get the best sell price: de-clutter and stage your home!

Staging tips in next post! :)