Occasionally, homeowners are forced to sell their property for less than the mortgage they own on it. This is what a short sale is.

The main consequence of a short sale, for the property owner in particular, is that the bank sets the final guide price and the terms of sale.

Banks and other mortgage suppliers dislike short-selling so it can take a long time for them to approve any offer made on a short sale property. This usually amounts to a wait of up to six weeks for the mortgage-provider’s approval.

During this period, in the current market, mortgages will have changed. Interest rates will have risen and it is possible that you will be unable to buy the property that you bid on six weeks previously.

Obviously, for any sort of speculator, time is money. Even for buyers interested in personal property as a home, this is a lot of time on such a risky deal.

Fortunately, there are other strategies available to investors that allow for changes in the market.

Investing in a buoyant market such as the one in Las Vegas now, is sure to build a very positive portfolio in the years to come. There is no harm in buying property for a high price if you are confident that the value of that real estate will grow. A true investor understands this and so will usually avoid the temptingly low prices of short sale real estate.

In fact, Las Vegas provides decent profits for any sensible real estate investor for reasons pertaining to the current market. Constant developments and new employment opportunities make it a reliable market.

You are likely to find many examples of short sale properties in Las Vegas because to the current market conditions. There are a lot of people that paid too much for his or her property originally; or who has altered the real property state in a way that was damaging to its value.

The key point to take away from this article is while short sales are risky, the can be very profitable if you have patience in the market. The key is to find a buoyant real estate market like the one that exists in Las Vegas. Sensible investments in a good market will repay you with a nice profit margin. Equally, people buying real estate as a permanent home may want to ensure that they don’t waste their family’s time on short sales or markets that will lose them money.

I hope this has helped you in your efforts to make money from real estate.

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Many financial and mortgage training institutes offer these mortgage officer training courses which are available in a new pattern. The old pattern followed was considered inefficient by the experts and thus, theses days new and revised pattern of teaching is followed which includes imparting practical knowledge instead of theoretical knowledge. This is managed by showing the students video clips which helps them make their ideas clear about all the things and get to know the actions that they should take at precise conditions. Such video clips give a student the first hand experience of handling various situations. Thus, the revised pattern of these mortgage officer training courses is extremely efficient and to the point.

The mortgage officer training course involves subjects like loan origination, mortgage products, underwritings and appraisals and many such important subjects from the point of view of the mortgage industry. The course also allows the trainees to pick up values like time management, getting and retaining customers, solving problems efficiently and avoiding mistakes. These values are extremely important from the point of view of a mortgage industry career.

Mortgage officer training courses are available live as well as online. The online courses can be used by people who work but wish to learn as well. The online course provides the user some specific time limit to complete a specific part of hi or her work thus teaching them to manage their time. The user may access the website any time he wishes to as they are kept accessible round the clock to their users. The online mortgage officer training program has been developed to match an average learner’s pace. This allows the people who have joined the mortgage officer training course at the speed a comfortable pace, and at the time they want. The online course too contains video clips to provide more practical expertise to the user along with mere theoretical knowledge.

The mortgage officer training course can also be taken by trained mortgage officers in order to brush up their existing knowledge and get some new knowledge. This may help the person in making his or her work more efficient and gain more income. The mortgage officer training course offers a 12 month valid license after the completion of the course. In these 12 months, the trainees may revise the mortgage officer training course by repeating the course.

Short Sale Training

In today’s real estate market, the once lucrative opportunity of being a loan officer or mortgage broker originating loans and refinancing homeowners is no longer so lucrative. The sub prime mortgage meltdown and the mortgage credit crunch has really put a damper on that traditional business model.

What all of the mortgage news sources don’t tell you is that the short sale mortgage business is doing fantastic right now. There are more defaulted mortgages in the marketplace right now than we have ever seen before. The transition from a residential mortgage broker business to a short sale mortgage business is very easy. The mortgage brokers and loan officers that use my short sale mortgage system are making ten times more now per file than they used to make by only originating loans. The opportunity to make big money in real estate short sales is now.

A mortgage loan officer has to know everything about short sales, defaulted mortgages and foreclosure investing. The short sale mortgage business is the best mortgage business opportunity right now in the mortgage market. The traditional mortgage business is not nearly as lucrative as it used to be. The big money in the mortgage business is being made with defaulted mortgages.

You can get started in the Short Sale Business Today with no cash, no credit and no previous experience. Also, there are no licenses needed like there is with a traditional mortgage business. This allows you to get started immediately because you don’t have to prepare for a test or anything like that. You can start making money now and continue learning along the way.

Traditional mortgage loan officer training classes do not cover short sales, defaulted mortgages or foreclosure investing. For years the traditional mortgage broker training or mortgage lending training classes didn’t need to cover foreclosures or preforeclosures. Now that the sub prime mortgage meltdown has created this huge opportunity for us, I have prepared a free online short sale course to show you how to make a fortune with foreclosures and short sales in today’s market.

Once you implement my strategies that you can’t get from any other mortgage loan officer training program, you will be the envy of all of your loan officer friends. What do you think they’re going to say why you’re bringing home $40,000 to $200,000 paydays on your deals and they’re still faring around with the same old lifestyle because they haven’t taken the time to get short sale mortgage training. Those who fail to adapt to our new and improved real estate market will fail to get the results you will see once you start using real estate short sales in your mortgage business.

If you are just now starting mortgage business, you should skip the traditional mortgage business, and start a real estate foreclosures investing business instead. The market is ripe with foreclosures and you should take advantage of the situation while it lasts. My Free Online Mortgage broker training course shows you how to start a mortgage business with a short sale business model. If you already have a mortgage business, you will discover how to leverage your current business relationships by adding short sales as a service you offer to your customers and referral partners.

To get a Free Online Mortgage Officer Training Course in Short Sales, Go here:

Mortgage Officer Training in Short Sales

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Despite the benefit to the lender and to the investor, the investor-buyer is often treated as a “bottom feeder” and with minimal respect. Why should the lender treat investors any differently? Common sense, which is not all so common, would say that getting rid of a headache is better than suffering. However, if lenders agreed quickly to short sale offers, they would be putting their portfolio at risk by not doing good and proper due diligence with regard to the real value of the property. In the old days, an investor could walk into a local bank office and ask if they had an REO’s. The clerks or tellers would send them to an officer who would have a few properties that were For Sale by the bank. These days are gone in 99% of the country. To avoid favoritism and possible fraud, these transactions are centralized in loss mitigation facilities throughout the country. All foreclosure cases are handled by these highly trained professionals that are taught how to handle investors.

Handling investors is very simple. The investors who get short sales done quickly and efficiently are offering way too much money, usually 80+% of the mortgage amount due. Lenders will take this 20% discount all day long. The real short sale specialists are the ones who work diligently and get discounts of 30% to 50% off. To get this amount the lender has to cool his heals and have the property listed on the MLS® to make certain the property can’t be sold for a more reasonable price.

Investors target the deficiencies in the property and any weaknesses the lender will have to correct or pay for until the property is sold through a realtor. If the realtor lists the property too high, there will be no offers. If he lists it too low, he will have offers but the buyer will have the low offering price on the MLS® to contend with when he rehabs and re-sells it to retail buyer, resulting in some buyers not being able to get financing.

The loss mitigation reps have hundreds of cases assigned to them and are paid on performance. Yes, the lender knows how much he is willing to discount each and every mortgage that comes into loss mitigation. So despite the best efforts of the investor to de-value the property, the loss mitigation rep already knows the amount he can allow the mortgage to be discounted. The “loss mit rep” knows because he has access to real estate agents’ price opinions (BPO’s), real estate agents’ comparative market analysis (CMA’s) and appraisals that all indicate the fair market value at a specific time.

The public records are reviewed to see what other issues the lender may face. Finally, a “kick-out” price is determined by a supervisor and the loss mit rep is given a monetary incentive to get anything higher for the mortgage. What happens is the loss mit rep is actually bidding against himself by allowing the investor too low a price. So the incentive is to control the investor by driving him crazy by not answering calls, and holding off as long as possible. If the short sale isn’t completed it is not a demerit against the loss mit rep.

The system of loss mitigation is inherently flawed by the way lenders compensate their employees and the number of cases (250+) each rep is required to handle. The cases that get the attention are the ones with the highest offers or lowest discounts because the loss mit rep gets a higher compensation. Unfortunately, this means that viable properties are left to sit and decay that could have been sold quickly otherwise and often for more money. So the lenders may care about getting properties off their books, but their loss mitigation system is flawed in the favor of the people who should be interested in doing the best job for the lender, not the homeowner or the investor.

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Home foreclosures refer to the legally-supported process of re-possessing a capital investment such as a home of an individual in a case where the home or house was presented as collateral for a financial institutional loan.

In the unfortunate circumstance where the home buyer is unable to service the loan, the bank or other financial outfit may re-possess the property with a view to selling it and recovering any monies owed to unto it.

Foreclosure is a process composed of some three distinct stages.

The first stage in the process is referred to as the pre-foreclosure stage. At this stage, the bank files a foreclosure lawsuit. The stage has different names in different states; in some states, it is referred to as ‘Notice of Default’, while in others, it’s called as a Lis Pendis. This is the stage when the bank gets to file a foreclosure lawsuit when a borrower falls back or defaults in payment three consecutive times.

During the foreclosure stage, the defaulting borrower has a number of options to save the situation and maintain ownership of the property:

Pay off the whole loan amount in full Bring or make the loan current for all past payments in due as well due attorney fees Discuss with the loaner with a view to working out a more executable repayment plan i.e.  Re-negotiate the loan terms to  more flexible and relaxed terms Dispose off the house and move on Sell off the house to an outside investor and then lease it back Refinance the property with another equity lender If the amount owed is greater than what the home would sell for, a quick short sale may be executed with the lender

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It is important to note that this stage is occur rent only in judicial states and not otherwise

The second stage in home foreclosure is the Trustee Sale or the Auction process. In this stage:

The bank or lending institution brings forward the property to a public auction The ‘sell by’ date is determined after a hearing up to four weeks before the proposed or due auction date The homeowner may attend the hearing and make a request of extension to execute himself a home sale. Usually, homeowners can bargain themselves 3 added days in a maximum of sixty days. As a matter of statistic, 95% of homes on auction revert to the bank as REOs.

The third and final stage in home foreclosure is the REO stage.

REO is an acronym for Real Estate Owned. The REO stage is the third and final part of the (home) foreclosure process as obtains in a judicial state. It is the stage where the property becomes REO should it fail to sell on auction to a 3rd party bidder.

Home foreclosure is expensive business for banks. The process of home foreclosure or repossession to a bank on average costs anything from $35,000 to $50,000. A digression from core business, yet inevitable a consequence or process for a bank, you could say.

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The Basics Of A Short Sale

The concept of a short sale is fairly simple. A short sale occurs when the sale proceeds of a house fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. A few words of warning are in order. Not every lender will negotiate a short sale. If for example your payments are current, yet you foresee imminent cash flow problems arising that will affect your ability to make your monthly mortgage payment. Lenders have no interest in negotiation unless your payments are several months late. Another consideration is you may be held liable for taxes on the difference between the sale amount and the original loan amount. Short sales require nerves of steel.

The Credit Affects

Foreclosure

Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points.

Short Sale

Short sales have a far less damaging affect on a seller’s credit report. Credit scores typically lose between 80 to 100 points. What happens to your credit down the road? It is takes around three years after a foreclosure before a lender will offer a sensible interest rate, whereas for a person who went through a short sale typically waits around 18 months to buy another home at a good interest rate.

Salvaging your credit should always be the primary concern when making the decision between a short sale and stopping foreclosure. The savings in interest payments alone should be convincing enough for most people, not to mention your buying power in the near and distant future.

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Whom ever people are making their mortgage payments to are the ones taking the hardest hit when a home goes into foreclosure. When a home is in foreclosure, it means that the home owner has stopped making their house payments. When this happens, the bank is forced to foreclose on the home and re-claim the home. Once they re-claim the home they want to get rid of the home. To get rid of the home, the bank must sell the home at fair market value for the home to have any chance at selling. If the fair market value is less than the amount owed on the home, the bank is going to take a loss because they loaned the home owner more money than the home is currently worth. If the home had any equity at all, the home owner probably would not have had to foreclose because they could have refinanced the home to take money out to pay the mortgage payments.

Lists are distributed to Realtors that are in pre-foreclosure, which means, the people are on these lists are late making their house payment, and have a possibility of going into foreclosure. This is a touchy subject to the people that are making their house payment late. There are multiple reasons why someone would stop making their house payments. Usually, the people that stop making their payments on their home are not doing it by choice, but out of necessity. However, you may be helping someone by an investor or home buyer purchasing a home in pre-foreclosure. If you can not afford the home any more, perhaps someone will purchase the home for you so you do not have to make the payments anymore.

If the home owner that went into foreclosure owes three hundred thousand dollars on a home, and other similar homes in the area are now selling for two hundred and thirty thousand, the bank is going to take a loss. This is a good time to get a home at fair market value, or possibly less. When the bank forecloses on a home, they own the home at this point. The bank acts as the seller, and the buyer and the buyers Realtor are now negotiating on a price with the bank. If no better offers are coming through the door, the bank may take your low offer.

When a property is in pre-foreclosure may be a beneficial time for someone to purchase a home. That is, if the property that is in pre-foreclosure has some equity. If the homes in the area are selling for three hundred thousand dollars, and the person that is in pre-foreclosure owes two hundred and thirty thousand dollars on the home, a good purchase price would be two hundred and thirty thousand dollars, or maybe two hundred and forty thousand. If a similar floor plan just sold in the area for three hundred thousand dollars, then this would be a wonderful buy because you just picked up some equity. Sometimes a Realtor will represent the bank and act on the banks behalf and negotiate a list price for the home. The bank is asking for a Realtor to sell this home at fair market value. This way, the bank can continue banking, the Realtor can try to get the property sold, and the homeowner can possibly get out of their mortgage once the house sells. This is a winning situation for the buyer, the bank, the homeowner, and the Realtors.

However, it is common when the seller owes more than the home is worth, then, the bank will ask the Realtor to price it to sell. When a bank tells a Realtor this in this hypothetical situation, the Realtor will have to price it lower than the surrounding competition in order for the home to sell. This is called a short sale.

A short sale is good for the buyer, better than nothing for the bank, and an act of desperation by the seller. It is good for the seller because they will get out of paying their mortgage payment if the house sells, but generally has a negative effect on the sellers credit rating. A bank will not negotiate with the seller on a short sale unless the seller is not making their house payments. This will have a detrimental effect on the sellers credit rating.

This does not guarantee that market conditions could get worse. Home values may drop any time, so this is a risk a home buyer or investor needs to contemplate. If the interest rates are dropping, and the market seems to be heading upwards, this might be a great investment. There is no way to predict market conditions, what goes up may very well come down. None of the information in this article will guarantee any type of return on your investment. When buying, selling, or leasing property in Arizona, it is imperative that you are properly represented so that you know what you are getting your self into. To get in contact with an honest, experienced, and proven Realtor, please click on the website partnered with this article. Arizona welcomes you.

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Essentially, being 1099′d means that the homeowners, after the short sale has been used successfully to stop foreclosure, will be responsible for paying the taxes on the amount of debt that the bank forgives in order for them to proceed at all with the sale. Taxes would only have to be paid on the amount forgiven, not on the contract price, final payoff amount, or foreclosure judgment.

For example, if the foreclosure victims owe $150,000 on the mortgage, but the bank accepts $100,000 as their final payoff in order to facilitate the short sale, the difference of $50,000 is the amount that is counted as “forgiven debt.” The IRS considers this $50,000 as if the bank gave the homeowners a gift for that amount, which was immediately used by the owners to pay down their mortgage. Therefore, taxes would be due on the amount given by the bank.

The homeowners would be responsible for paying taxes on the $50k, at whatever their marginal tax bracket will be that year. There are ways to get around this, though, such as if the homeowners are insolvent at the time of the sale. This means that, when the short sale went through, they owed more on the mortgage than the home was worth. To better understand the issues that may affect the tax liability on a short sale, it might be worth visiting the IRS website or consulting with a CPA to find out more before closing on the deal.

But the bottom line is that the homeowners facing foreclosure will only get a 1099 if the bank forgives any of the debt owed to them and allows the short sale. It will not be an issue if the house is otherwise disposed of, even if it is sold at a county sheriff sale for less than the total amount of the foreclosure judgment.

When the house is auctioned off at the sheriff sale, the bank does not forgive any of the debt. They are just using the legal mechanism of foreclosure to force the sale of the house and get back as much as they can. All that the bank has in this case is a loss, so there will be no income to the homeowners that can be considered as forgiven debt. The bank would not be able to show that the foreclosure victims received income in this form when the owners did not voluntarily sell the property and the mortgage company did not voluntarily forgive any of the debt. No voluntary agreement to take a lower payoff equals no forgiven debt equals no extra income tax liability.

Since the whole foreclosure process is coercion by the state to sell a property to enforce a contract, a sheriff sale would not be an event that triggers extra income to the homeowners. A short sale, though, can be an extremely effective resolution to stop foreclosure, especially in the type of real estate market as exists right now. Many homeowners are underwater with the equity in their homes, and they are much more likely now to fall under the insolvency exclusion than they were even a few years ago during the real estate boom.

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The adjustable rate mortgage sure sounded good a few years back; you got 100% financing at a very low interest rate; fixed for 3 years before it resets or adjusts according to the market. You probably had a plan to sell the home soon or refinance before the rates went up. You didn’t count on the values declining to the point where you owe more than the home is worth, making refinancing difficult to impossible. Your rate continues to adjust, the payment increases significantly, you cannot afford the payments and you are in danger of losing your home.

Following are stages of foreclosure and your options:

Miss one payment: Payments that are 30 days late are reported to credit bureaus to be reflected on your credit report and factored into your credit score.

Miss three payments: Typically, lenders file a notice of default at this time; some are very aggressive and some wait up to a year to file. Some hold off if you have contacted them and made satisfactory payment arrangements. Of course, more late payments are reflected on your credit report.

The notice of default is public record; soon you are receiving mail and phone calls from companies promising to save your home or reduce your payments. You are also an easy target for scam artists who promise to take over your mortgage while you pay them rent; they collect your rent, they don’t pay the mortgage and the foreclosure process continues as your credit suffers more damage.

90 days after the notice of default: Lenders typically give borrowers 90 days from the notice of default to make up their payments, late fees, legal fees and any other charges that have accrued. If the arrearage is not paid up, a notice of sale is sent out and the foreclosure sale takes place within the next 30 to 60 days. At this point, your credit report is quite bruised and your lender may or may not be willing to work with you.

Options: It is important to contact your lender and speak to someone in the loss mitigation department as soon as possible; the earlier in the process you are the more options you will have. Resolving issues early will help avoid serious damage to your credit report. You will be more likely to work something out with the lender before the foreclosure sale, also known as sheriff’s sale.

Look into Refinance Options: If you have equity in your home and your lender hasn’t yet filed a notice of default, you may be able to refinance with a more affordable mortgage. An experienced mortgage broker will be able to help you determine your best option. Do not get into another adjustable rate mortgage or interest only mortgage, leaving you vulnerable to repeating the process.

Workout or Modification: If you enter into a workout agreement with your lender it is important to be focused on a plan that works with your budget. You must be able to make the payments as agreed; if you fail to make the payments, the lender will accelerate the foreclosure process.

Short Sale: If you owe more than your home is worth, it is sometimes in the lender’s best interest to accept a short payoff on the mortgage balance. This saves having a non-performing property on the books that continues to lose value in today’s declining market. A short sale will have less damaging effect on your credit report as you are doing something to meet your obligation to the lender.

Deed in Lieu of Foreclosure: You can offer to sign your home over to your lender in exchange for being released from the mortgage obligation. This keeps you from having to pay off the mortgage and the lender avoids further legal costs to complete a foreclosure. The lender does not have to accept a deed in lieu of foreclosure; typically, he will require that you try to sell the home first.

Credit Counseling Services: Legitimate credit counseling services typically have housing counselors who can analyze your situation and help you evaluate your options.

Let Foreclosure Run its Course: You should save this for your last option after all other methods to avoid foreclosure have been exhausted. In some states and some cases, the lender can go after you for any deficit between what the house eventually sells for and what he is owed.

Foreclosure, though devastating and overwhelming, is not the end of the world. You can get through this difficult time, reorganize and rebuild your life and your credit score. You will be able to get another mortgage and with knowledge and experience gained from this situation, you will be less likely to go through this a second time.

This article was written by David Smith of U-Move-On, a company who helps people find the best solution to their foreclosure problem. U-Move-On assists in evaluating the individual situation and explains all one’s options. They provide the resources and services for help with the entire foreclosure process, credit restoration, finding another nice home, moving expenses, legal help and more. There is no complicated contract to sign and you do not quit claim interest in your home.

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With the economy in a recession and the Real Estate Market at its worst in decades, many taxpayers have either experienced or are facing the threat of a foreclosed home or other piece of Real Property.

The number of foreclosed homes and short sales has skyrocketed in recent years amongst a failing economy and an unemployment rate hitting historical highs. To make matters worse, some experts are predicting a “bottoming out” of the economy as late as 2012. In the meantime, the number of people losing their homes continues to rise.

The foreclosure of Real Property can give rise to many questions and concerns for taxpayers. 

Upon the foreclosure or short sale of a piece of real estate, the lender with the deficiency will issue a Form 1099-C, Cancellation of Debt to both the taxpayer and the IRS. In past years, the amount of cancelled debt would give rise to what is sometimes referred to as “phantom income”. This phantom income would be taxable as ordinary income and would result in tax that had to be paid by the taxpayer. The taxpayer however, having never taken actual receipt of any cash, would many times be unable to pay the tax this phantom income produced.

Fortunately for taxpayers, Congress addressed this very issue in The Mortgage Forgiveness Debt Relief Act of 2007. The bill; H.R. 3648, was passed by Congress and was signed by President George W. Bush in December of 2007. The bill, grants relief to homeowners that have been given relief from mortgage debt through a foreclosure, short sale or other similar agreement with the lender. Generally, eligible debt is what is referred to as acquisition indebtedness. Acquisition indebtedness is defined as debt incurred to acquire, construct or rehabilitate a residence. However, refinanced debt will qualify, so long as the debt does not exceed the original amount and home equity debt will qualify so long as the funds were used to improve the taxpayer’s home. No relief is available for cash-outs. The forgiven mortgage debt must have been secured by the residence and no more than $2 million of mortgage debt is eligible for the exclusion ($1 million of mortgage debt for a married person filing separately). The relief applies to qualified debt forgiven between January 1st 2007 and December 31st 2012.

While the State of California does not conform exactly to Federal law, it also provides relief from tax on forgiven mortgage debt for calendar years 2007 and 2008. Senate Bill 1055, enacted September 25th, 2008

allows taxpayers to exclude up to $250,000 of cancellation-of-debt income resulting from a discharge of a loan that was used to acquire, construct, or substantially improve the principal residence of the taxpayer. The maximum amount of a loan eligible to be excluded is $800,000. The exclusion is further phased-out for discharged loans that exceed $800,000. Some taxpayers may need to file an amended California return for 2007 in order to take advantage of these provisions. Doing so may result in a refund or reduction of tax liability.

For taxpayers who have lost their homes either through foreclosure or a short sale scenario these relief provisions are welcome news. However, it is important for taxpayers to remember that these provisions only apply to principle residence loans that were used to acquire, construct or rehabilitate a taxpayer’s principle residence. Taxpayers who have used loan proceeds for other purposes may still be facing a taxable income situation. Taxpayers who have experienced or are facing foreclosure or short sale scenarios on rental, business or investment properties are likewise at risk as these provisions will not apply. In these situations it is imperative that taxpayers have a competent tax professional to assist them with their tax planning and preparation. Taxpayers may still be able to obtain relief under other provisions such as the establishment of insolvency. However, navigating specific tax laws in these areas can be tricky.

Christopher R. Jacquez, EA

CEO, eTaxRelief – Tax Negotiation & Preparation Services, Debt Relief

www.eTaxRelief.com

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The housing boom of several years ago in California caused many to get in far over their heads. What seemed like a steal for a home in paradise became a bid for a shack in the underworld once adjustable-rate mortgages shot through the roof. If you find yourself in this situation, the short sale may be your best friend.

Many times pre-foreclosure happens because of a sudden and drastic change in your financial situation. Everything’s been downsized, you’re bringing home less money and your payments have skyrocketed. Before you realize what’s happened, you’ve fallen a month or so behind on your mortgage and have been notified of the default on your loan. Your world is shaking, but there’s no earthquake being recorded. Fortunately, this financial hardship will most likely mean that you are eligible for a real estate short sale.

When the amount you owe exceeds the value of your home but you still need to sell, you are talking about a short sale. While still in the pre-foreclosure stage, a deal is arranged with the lenders wherein you would pay less than what is owed on the property. The difference is generally forgiven; though there are pitfalls to avoid.

It’s important to be well aware of any possible legal consequences before committing to a short sale. Be sure that every little detail regarding the release of debt is in writing. Make sure that the lender is not going to force payment of the remainder after the short sale, especially if you have other assets to protect. There have been instances when sellers have been notified that the lender will seek repayment of the debt after the short sale is complete.

Lenders will usually consider a short sale only when you are at least one month in default on your mortgage. It’s also important to have a buyer at hand who is financially able to take on the responsibility. Much documentation is required as proof of your inability to make payments because of your financial hardships. These may include tax returns with W-2s for the last couple of years, bank statements of the last few months and recent pay stubs. A copy of your ‘deed of trust’ and ‘mortgage note’ is also required. All of these documents will combine to form an image of your present financial state.

A home in pre-foreclosure need not be the proverbial financial guillotine that it appears to be. By choosing the option of a short sale you can avoid proceeding into the dangerous zone of foreclosure. Yes, it will affect your credit score. But it’s a far brighter way out of the dark tunnel of mortgage debt than a foreclosure. As always, when considering options such as this, do your homework and find out the best option for you.

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