A short sale is basically the last option that homeowners with unpaid mortgages turn to before a foreclosure.

One of the first thing to do when things get out of hand and you can not meet your mortgage payment is to determine if this problem is just temporary or not.  If there is a big possibility that you will not be able to pay your mortgage because of extenuating circumstances like death of a spouse, divorce, terminal illness, and the like, then you should start thinking of the possibility of a short sale especially if the value of your property falls below the amount you owe the bank.  You should not wait until the threat of foreclosure is imminent because the whole process of negotiating for a short sale is rather long and you might find yourself out of time.

Not all banks accept a short sale so better check your bank if they do so.  But most banks take part in the process because it would be better to get a little less than what is owed to them than foreclose the property and sell it themselves.  They also have their own custom when it comes to short sale so you have to inquire about it.  They have a short sale packet which consists of several forms.   One of the documents required is called the letter of trouble.  Basically this is simply your letter stating the reason behind the request for short sale, your chance to explain your side for the unpaid mortgages.  Make sure you get legal counsel to check your documents so that you can be properly advised.

Once the request has been approved it means that the bank accepts that they will be getting payment for the mortgage property at a much lower amount.  There are banks that may continue to charge you with the difference which is referred to as “deficiency judgment” and will show on your credit records for the next seven years.  However, there are banks that will just accept the sale amount as full payment for what you owe them and the payment will be referred as “Payment in Full without Pursuit of Deficiency Judgment”.

This is a difficult process but you have to make sure that the bank understands your inability to pay your outstanding mortgage.  Most banks would be asking borrowers to get a realtor to facilitate the process and you have to make sure that the firm you get is not only licensed but has enough experiences on this process.  You don’t want to be a victim of a scam so make sure that whatever fee they will be charging is minimal and a percentage on the resulting sale.
 
Times are hard and you have to face the fact that you would be losing your home.  With a short sale, you can start anew with a house that you could afford and more convenient for you rather than get a home foreclosure on your credit record that would haunt you for years to come.

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