It's important that you understand how the process works, how it may impact your future and the options you have to complete your responsibility to the lender after the sale.

By understanding how the process works right now, you will be able to work with your Consultant to agree on a listing price.  You will need to target current market value and you will also want to get all the required paperwork together as quickly as possible so your agent can forward a complete package to the lender's asset manager/loss mitigator.  Your consultant should have a system set up to follow up with you, the selling agent and the lender on a regular basis to review the progress on the file and keep interest levels as high as possible.  Open communication is key.

What is a short sale?
A short sale is the result of the sale of a property for less than what is owed to the lender.  The lenders approval of a short sale specifically means that the lender may release or satisfy the "lien" on the property allowing the property to be sold and the physical burden of the property removed from the borrower.  The borrower however may still be responsible for the "Note"

The difference between Foreclosure and Short Sale.
The impact on the borrower varies between the two.  If there are greater proceeds expected from a foreclosure sale, then no short sale will be considered.  Typically; however the short sale will generate greater proceeds to the lender.  You as the borrower, would like the highest amount of proceeds from the sale as you may be responsible for the deficiency. 

How does a short sale affect the borrower?
The amount of the shortage is called the deficiency.   Typically the 2nd mortgage will take the biggest loss.   If the 1st mortgage is also taking a loss, the 2nd mortgage experiences a total loss of it's investment.  If a property goes to foreclosures, the lender will seek a "deficiency judgement" from the court, making the borrower responsible for the entire amount of the loss in payment amounts detailed by the court. 

Representation:
It is suggested that the seller seek a Real Estate Professional (Realtor®) with professional marketing experience.  The higher the sales price, the less the deficiency resulting from the short sale.  Remember, the seller may be responsible for the entire deficiency of the sale.  A professional Realtor® knows how to market your property. 

Results:
What are the typical results of a short sale?  The lender at its discretion, may pursue collections of the deficiency resulting from the short sale by standard collection practices, legal process, accept an unsecured note for all or part of the deficiency, or send you an IRS form 1099 forgiving the debt - but you will be responsible to the IRS for taxes on the deficiency as it will be considered taxable income. 

It's important that you understand that the Short Sale process and how it will ultimately affect you in the future.  I advise you to seek the guidance of Tax and Legal Professionals to help you make the right decision for you and your family.  

For more information on options to stay in your home, please look at the following link: