FORECLOSURE ALTERNATIVE

Short Sale Relief

When Selling for Less May Be an Option

A short sale is a lender-approved sale of a home for less than the total amount owed on the mortgage. It can be an alternative to foreclosure, but it is not automatic and is not right for every homeowner. Approval may be required from the servicer, loan owner or investor, mortgage insurer, and every other lienholder.

When a Short Sale May Fit

• The home appears worth less than the total mortgage and lien balances.
• Payments are no longer sustainable.
• Retention options have not worked or are not affordable.
• There is time to market the property and complete lender review.
• A qualified buyer can submit an acceptable offer.

The Basic Process

1. Review value, mortgage balances, liens, arrears, foreclosure deadlines, and homeowner goals.
2. Request the servicer’s short-sale or loss-mitigation package.
3. Assemble financial information, hardship explanation, mortgage statements, listing information, purchase contract, settlement estimate, title information, and supporting documents.
4. Submit a complete package and respond promptly.
5. Obtain written approval from every required mortgage holder and lienholder before closing.
6. Review deadlines, relocation assistance, contributions, deficiency treatment, and other conditions.
7. Close through qualified professionals.

Questions That Must Be Answered

• Will the lender waive the deficiency in writing?
• Are junior liens fully released?
• Could canceled debt create Form 1099-C or tax consequences?
• What happens if approval expires?
• How may credit be affected?
• Is a foreclosure sale scheduled?
• Are there restrictions on the buyer, resale, commissions, or seller proceeds?

Compare the Possible Paths

A traditional sale is usually preferable when value can cover the mortgage and selling costs. A modification or other retention option may fit homeowners who want and can afford to keep the home. A deed-in-lieu may be considered when an approved sale cannot be completed. A Fresh Start acquisition may offer another organized-exit path for qualifying properties. Foreclosure and abandonment generally leave the homeowner with less control.