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Want to avoid foreclosure?  Have you been thinking about a short sale? Read the article below to go through the short sale procedure so you know what you will be getting yourself into ahead of time.

Short sale real estate is quickly moving to the forefront of real estate transactions involving preforeclosure property. This option involves selling real estate ‘short’ of what is owed on the mortgage loan. Banks sometimes offer this option when borrowers locate a qualified buyer and the sale can close quickly.

Obtaining approval to short sale real estate is a lengthy process that often requires assistance from a real estate lawyer. However, the first step of short selling requires borrowers to obtain approval from their lender and adhere to specific protocol.

Banks are not required by law to enter into short sale agreements. Mortgage lenders will offer this option to avoid the time-consuming tasks and costs associated with the foreclosure process. The average cost of foreclosure hovers around $ 60,000 per property, while the cost of short sales ranges between $ 10,000 and $ 25,000.

The option to short sale is only available to borrowers who do not have the financial means to cure mortgage arrears and do not qualify for other home-saving solutions such loan modification or mortgage refinance. Borrowers cannot possess accrued home equity and must owe more than the appraised value of their home.

Under certain circumstances, lenders offer the option to short sale to borrowers who do possess home equity and are not delinquent on loan installments. Although rare, banks can agree to a real estate short sale when borrowers are facing extreme financial challenges due to divorce, death of a spouse, or terminal illness. Borrowers facing these types of tragedies should contact their bank’s loss mitigation department to discuss available options.

Borrowers are required to submit financial records to an assigned loss mitigator. This bank employee will work with them throughout the process. Lenders often require letter of hardship detailing events that led to loan default and inability to pay future payments.

The hardship letter will be one of the most important letters you have ever written, so take time to craft it carefully. Hardship letters should be written in chronological order and provide adequate details of financial hardship.

It is also important to include information regarding action taken to overcome financial difficulties. For example, if you have cut up credit cards, discontinued cable TV or cell phone service, sold a vehicle, or sold financial assets, be certain to include this information. It is important to show that you have made sacrifices in effort to save your home from foreclosure.

Once borrowers obtain short sale approval they must sell their home within a certain amount of time. Although most banks require borrowers to have a buyer in place prior to entering into contract, some grant borrowers time to list their property through a realtor. It is imperative to understand the short sale real estate procedures offered by the lender to ensure proper protocol is followed. Otherwise, lenders can void the contract and commence with foreclosure action.

One option for selling preforeclosure property is to locate investors who buy homes. Many real estate investors have participated in real estate short sale transactions and can assist throughout the process.

It is crucial to determine if the lender accepts the sale as payment in full or if they issue deficiency judgments. Some banks require borrowers to pay the difference between the sale price and loan balance. When mortgagors are unable to pay deficiency amounts in full, banks obtain a court ordered judgment. Deficiency judgments remain on credit reports for up to 7 years after the debt is paid.

Short selling is often perceived the same as foreclosure by the credit reporting agencies. Borrowers should engage in credit repair as quickly as possible to restore FICO scores. Unfortunately, there is no way to avoid financial consequences associated with short selling. However, if borrowers are proactive and commit to paying bills on time and in full, they can rebuild credit and qualify for a home loan within 2 to 3 years.