A mortgage short sale is where a home owner can sell his home for less than he owes on it, and the lender agrees to let him off the hook if they get all the money from the sale. For example, let’s say that I own a house and owe $200,000 on a mortgage. Unfortunately, the housing market has gone down, and the house is now worth only $150,000. I lost my job and can no longer make payments. What can I do? I can’t live in the house because the payments are now too high for me. I can’t sell it because I’ll only get $150,000 for it and will still owe $50,000 on the mortgage. I don’t want to stop making payments and just walk away because the foreclosure will be a black mark on my credit for a long time. What can I do?
A mortgage short sale is one way out if your lender will agree to it. I agree to sell the house and turn all the proceeds over to the lender. The lender agrees to take the proceeds from the sale and discharge me from further obligation. Both sides give up something, but both have a little to gain. I get out of my obligation to pay off the house, but I lose everything I put into it. The lender has to settle for less than he is owed, but saves the expense of foreclosing on the house.
The decision to allow a mortgage short sale is totally up to the lender, so be cooperative and be prepared for a lot of questions such as the circumstances that brought you into your predicament.