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Why do a short sale?

If life has thrown you a curve ball and put you in the position of losing your house, the last thing you need is someone blowing smoke at you. What you need now is someone who can help you find your best way out of this tough situation.

Foreclosure is not the best way out. Walking away from your home is not the best way out. Those options may only make life worse for you. A short sale may be your best option.

• Banks have up to 26 years to come after you for a deficiency judgement, if you walk away from your home or allow a foreclosure to occur
• Banks may just sell your deficiency judgement to a collection agency and they can hound you for all of those 26 years
• It will be 5-7 years after a foreclosure before you can qualify for a new mortgage vs. An average of 2 years with a short sale (the FHA has proposed allowing short sellers who were not delinquent to purchase again the day after the short sale)

Let’s get this straight, too - you will NOT have your current house at the end of the short sale process. This is not some magic way to save your house. This is a way to get you out of this mess with the least amount of damage to your credit and the best chance of getting a new home in the least amount of time.

What about a loan modification?

The lenders have seen a high rate of eventual delinquencies and foreclosures on loans that they have modified. Some of that is likely their own fault, based on the way that they did the early loan modifications. The banks that took Federal TARP money are obligated to at least offer this option, but they are not enthusiastic about the program and most would prefer a short sale. Many lenders will not even offer loan modification as an option; however, you should ask your lender if they have a Home Affordable Modification Program (HAMP) that might work for you. Click here for a HUD report on the HAMP program that has lots of good information on the program and other links.

Why not do a deed in lieu?

The deed in lieu option, in which you hand the property deed over to the bank as payment for your mortgage obligation, has fallen out of favor with banks who prefer that you make the effort to sell the place, rather than having to do that themselves. Many banks have stopped accepting deed in lieu proposals. Click here for a good article from the Mortgagefit.com Web site on the deed in lieu option.

What about declaring bankruptcy?

While bankruptcy may indeed protect you from collection efforts by the bank, it is also the most damaging to your credit history and takes the longest to recover from. Click here for an interesting article comparing those two options. For the view of the same question as written from a lenders point of view click here.

Click here for an interesting blog post by a short sale lawyer after his meeting with top Bank of America officials at a recent short sale summit.

OK, I get it. How can you help?

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