How can you avoid foreclosure if you are already behind on your mortgage payments?  One way to avoid foreclosure is to accept a short sale.  In a short sale, you sell your home to a buyer for less money than what you paid the mortage company. The mortgage company accepts the lower purchase price instead of the actual amount you owe on your home.

You have to be delinquent on your mortgage payments in order to be considered for a short sale. Elizabeth Weintraub, real estate agent, provides eight tips on how to get  your sales price approved by your lender in her article, "Short Sales in Real Estate- How to Handle Real Estate Short Sales". 

A summary of Weintraub's tips are as follows:

1.  Contact your lender

Don't write or email, call your mortgage company.  Get the name and number of the supervisor in charge of handling short sales.  Don't give up until you get this information.

2.  Write a letter to your lender.

Include your name, phone number and address, the date, your loan number and your real estate agent's name and phone number.  Give permission in the letter for your mortgage company to speak with and disclose information about your loan to your real estate agent and/or closing attorney.

3.  Send a Closing Statement to your mortgage company

Once you have an accepted purchase contract that You need to have a closing statement prepared and faxed to your mortgage company.  This statement will show all of the closing costs and payments that will come from the purchase price the buyer is paying for your home.  It will also provide proof to your lender that you are not making any money from the sale of your home.

4.  Send a letter that proves your financial hardship to your lender

Write a letter to your lender listing the reasons why you got behind in your mortgage- include facts and personal information.  Ask the lender to forgive your circumstances and to accept less than what you owe them for the sale of your home.

5.  Disclose your finances to your lender

Your lender will want proof of your income.  They will also want to know about any assets that you might be able to liquidate to pay your mortgage debt.  Full disclosure of your situation is the best way to get approval from your lender.

6.   Send copies of bank statements to your lender.

Your lender will want an explanation if your bank statements show large withdrawals or deposits.   An explanation of each deposit might also be asked for.

7.  Comparative Market Analysis

Your real estate agent should provide you with an analysis of your home's market value known as a Comparative Market Analysis (CMA).  This analysis needs to be faxed to your lender. The CMA can provide reasons why your home cannot be sold for a price that would be enough to pay off the debt you owe on the home.

8.  Send a copy of the purchase agreement to your lender.

Fax a copy of the purchase agreement to your lender once it is signed by both parties.  The lender will want to review this document and the listing agreement that you signed with your real estate agent as well as approve or accept certain terms on the contracts.

Timing is everything

If you are considering a short sale as an alternative to foreclosure the best chance to get it approved is full disclosure to your lender as quickly as possible.  Use the eight tips recommended above as a checklist for your process and involve your real estate agent and your attorney every step of the way.

Posted by Rebecca D. Levinson

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