How to Do a Short Sale

Not all mortgage lenders will accept short sales, since in many situations it makes a great deal more financial sense for them to simply foreclose on the house and resell the house for what they might be able to get.

While every situation (and every lender) will differ, the following are the basic steps for how to do a short sale - how to go about the process of asking for (and possibly receiving) a short sale:

1. Know the Numbers and Do the Math

The main numbers you'll need to know will be the total cost of selling your home (value plus any fees for brokers, closing costs, etc.), as well as the total amount left on your loan.
The difference between these two is the issue in question, and it's the number you'll need, more or less, when you approach your lender about a short sale.

2. Talk to the Lender

If your lender has assigned you a customer service agent who handles your contract, he or she is probably a good place to start.
If not, you can speak to any representative with the authorization to handle billing and payments.
Your goal is going to be: first, to find out whether your lender is open to setting up a short sale agreement; and second, to negotiate terms that work for both of you.

3. Make Arrangements and Be Flexible

If your lender is willing to do a short sale, you should count yourself luckier than many – but you're definitely not home free yet.
Every lender will handle such a situation differently, and some may have specific terms, requirements, and rules that will be applied to any such agreement.
You shouldn't go into this negotiation expecting to have your loan amount reduced by a significant amount, and you shouldn't go into it determined to have your way.
The key is going to be a give and take: perhaps the lender won't reduce the loan amount as much as you would like, but they will take smaller payments, or will lower your interest rate, in exchange.
If your lender is willing to work with you on a short sale, basically, they are telling you that they'd rather not foreclose on you, and that's a point in your favor. It means both of you are hoping to find a solution.

4. Complete the Transaction

In the finals steps for how to do a short sale, you will:

Sell the home at the lower cost
Turn over the proceeds to the lender

Congratulate yourself. Avoiding foreclosure is an excellent goal and a healthy step towards a quick recovery for your credit and your bank account.

Basics of a Short Sale

A short sale essentially means that the lender agrees to accept less than the amount of the original loan.

Once the agreement is made between the lender and the home owner, the home owner sells the home for this lower amount and turns the proceeds over to the lender.
Whether or not the buyer is still responsible for the remaining balance depends on the agreement the lender might be willing to make.

It's a cold, hard fact, but it's the truth: in order to get a short sale to work, not only do you have to get lucky in terms of economic timing (so the deal is to the benefit of the lender), but you also have to gather your courage and ask for one.