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Negotiating A Short Sale To Avoid Foreclosure


The dismal housing market and proliferation of sub-prime home mortgages have led to an unparalleled rise in home foreclosures. Homeowners who are suffering from a financial crisis and have defaulted on a home loan or know that they are in imminent danger of being unable to meet mortgage payments have a few options to avoid outright foreclosure.

Foreclosure is defined by the U.S. Department of Housing and Urban Development (H.U.D.) as “a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.”

Foreclosure Law Varies From State to State

It is vital to understand the particular laws in your state in order to understand how they will affect your home mortgage and foreclosure case. An experienced, local foreclosure attorney can help you to understand the options in your state of residence.

Avoiding Outright Foreclosure

One option that has become popular during this unprecedented national housing and home foreclosure crisis is the use of the short sale. A short sale is most simply defined as a real estate sale in which a property is sold for less money than is owed to a lender. In other words, the profits from the sale “come up short” of what is owed on the property.

Short Sales as an Alternative to Foreclosure

Homeowners are not the only party that loses something in the process of a foreclosure. Lenders, such as banks, lose revenue when borrowers that had been making payments on a home mortgage cease to do so.

Lenders also lose income when they foreclose upon and take possession of a home that they cannot sell in a depressed housing market. Foreclosed homes often are sold at a rate far below the initial value given at the time the mortgage.

When a homeowner is having trouble selling their house in order to avoid bank foreclosure they should consider seeking advice from a real estate attorney. Since real estate laws vary from state to state, it is important to speak with an attorney who specializes in real estate law before making any decisions. Complete our short questionnaire today to locate an experienced real estate attorney in your area. 

Another important aspect of foreclosure and short sale is the effect it will have on your consumer credit score. While a short sale will adversely impact your national credit report, it is less harmful to your credit score than a foreclosure.

Steps to Negotiating a Real Estate Short Sale

Before attempting to negotiate a short sale, ask your real estate attorney to help you determine if your state’s laws would allow the bank to pursue you to collect for the difference between the outstanding balance on your mortgage and the net gain from the short sale of the property. This might impact your decision to proceed with a short sale.

The most important steps to negotiating a short sale are listed below:
  • Talk to your lender - specifically a person who is in charge of deciding when a short sale is permissible.
  • Consult with your real estate lawyer to help draft a letter of authorization that will allow the bank to disclose financial information to your attorney.
  • Work with your real estate attorney to prepare an estimated closing statement, or net sheet.
  • Submit a letter that explains why you are in such a financial burden and deserve some debt forgiveness from the lender.
  • Assemble financial records that provide proof of assets.
  • Finding Help With Advice on Short Sales and Foreclosures
Real estate law is complicated and can vary from state to state. It is important to speak with a foreclosure attorney who specializes in real estate law before making any hasty decisions. 
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