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Many homeowners are learning about short sales the hard way. It used to be that lenders wouldn’t even talk about you selling your home for less than you owed, but some lenders are becoming more accommodating because they don’t want to go through the additional expense of foreclosure or another asset to get rid of. This is putting lenders in precarious positions, but many of them are negotiating short sales, if a buyer might be interested or a seller is facing foreclosure or bankruptcy, otherwise.

The way that a short sale works is that a borrower needs to get approval from their lender first, especially if they are forced in a position to sell the house, like in the case of a job loss or a relocation in order to continue working. Lenders are more willing to talk with borrowers because it saves them the long foreclosure process, which can take more than a year because the courts are overwhelmed with foreclosures. A short sale can save what is left of a borrower’s credit, if the lender is willing to go along with it.

The best way to ask about a short sale is to be honest with your first mortgage holder. Just because they agree doesn’t mean that other lien holders will agree, especially tax lien holders, so this is a fact you will have to consider when asking to sell your home for less than you owe, or on a short sale basis. The short sale is written into a real estate contract as a contingency so if the short sale isn’t approved, your home sale can be cancelled.

Some homeowners might negotiate a real estate sales contract first and then get the lender to agree to a short sale. The way that this can occur is that you list your house with a real estate agent and you get an offer that is close to what you owe. By the time the real estate commission and other costs are figured in, you might be ten thousand dollars short or you need to come up with this additional cost at closing, based on what you currently owe. When you have a contract for sale on your home, or an appraisal has come in lower than you owe, you will be faced with negotiating a short sale with your first mortgage holder.

This is the common situation where most homeowners are faced with talking to their lender about a short sale. Rather than turn down a real estate sales contract, a short sale should be considered and you need to talk with your lender, if you are in a situation where you have to sell.

The way to remember what a short sale is comes from the shortage that the owner is faced with, when an otherwise good offer is received. It used to be that lenders weren’t approachable, but with current market conditions, it is commonplace for lenders to put the short sale decision before their loss mitigation department for a decision. In many cases, the lender is willing to accept a nominal loss versus the legal fees of foreclosure, so borrowers should always talk to their lender, when faced with an offer that doesn’t pay off the mortgage.

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