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Negotiating a Short Sale with Your Lender

Feb 11, 2008
When you fall behind in your mortgage payments, you run the risk of having your lender foreclose on you. That means you lose your home, property, everything, and end up with a very damaged credit rating that could mean you will have troubles buying a house, renting a car or even getting cable television for at least the next 10 years! This is where a short sale comes in very handy.

Short sales are ideal for when you want out of your house and need to sell fast, before foreclosure. You'll need to talk to your lender and get them to accept a short sale, which basically means they agree to accept less than the owed amount of money. In order to convince a lender that this is a good idea, you will need to cut back on your own spending and try to find a real estate agent who can give you a fairly low commission, making the lender more willing to work with you on this.

Make sure you talk to the supervisor in the lending company. Stay away from any underlings, as this can not only slow the process, but end up giving you mixed information. Go directly to the person who is in charge and who can make the decisions on whether or not to let you do a short sale on your home. This may take some work on your part, but it's worth it, since you may get the runaround otherwise.

Once you have contacted the person in charge of short sales, you will need to submit a letter of authorization. This gives the lender permission to release your personal information. The letter of authorization should include the date, your name and address of the property to be sold, as well as the loan reference number and real estate agent contact information.

The next step is to submit a preliminary net sheet that outlines how much you expect to sell the house for, as well as all outstanding loans, fees that will be incurred via the real estate agency and any late fees. If you are confused by this, talk to your lawyer or real estate agent about the costs that will be incurred.

You will also need to submit a hardship letter, letting the lender know exactly why you are in this financial situation. Preferably, you've had an illness or medical issue or lost your job, since they probably won't be too sympathetic if you lost your money gambling.

Other paperwork to hand over to your lender include proof of income and assets as well as proof of income statements. You need to prove that you are honest and aren't hiding large sums of money from the lender. After that, it is a matter of finding a buyer for your short sale and completing the sale successfully, provided you receive permission from the lender to do a short sale.

Short sales can be the ideal way to get rid of the problem of foreclosure. Provided you have a good excuse for not being able to pay your mortgage, you should be able to get permission to pay less than the original loan amount and save both face and your credit rating.
About the Author
Seb Frey is a Capitola, California Real Estate Broker specializing in Santa Cruz Real Estate. He is fluent in Spanish and enjoys helping people find their piece of the American Dream in Santa Cruz. You can find Seb's blog at SantaCruzHomeBroker.com/blog.
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