What Does Short Sale Mean

What does short sale mean? Well, for most people it means financial trouble that can cause serious consequences – bad credit rating that will haunt them for years to come. In detail, short sale means that if you owe to the bank in mortgages say $500.000 but your property value has gone under and now is worth only $300.000 and your mortgage holder agrees to settle your debt and get the offered $300.000 instead of undergoing foreclosure process.

While this may seem like not such a good choice, short sale process actually is more preferable to the foreclosure for both sides. Why? Consider that remaining mortgage amount consists of two parts – the base amount of your mortgage and yet unearned profit. In case of short sale there is a good chance for a mortgage holder to come out of the process without any actual losses. For the property owner it is a chance to come out of the whole deal without debt, if the bank accepts short sale as a solution to settle the debt.

How to apply for short sale? First of all, you have to check if you are eligible for the short sale process – this can be done if you are in real financial trouble – have lost a job, do not have any property or equity to sell to cover the mortgage. Keep in mind that this whole process is lengthy and cumbersome yet still far better choice than foreclosure. I recommend looking for a professional help through the whole process – trust me, a good short sale lawyer in a longer run can save you whole lot more – consider foreclosure consequences and try to do all possible to avoid foreclosure as an outcome!

Secondly, you have to initiate short sale process by writing a hardship letter for short sale – in this letter you have to explain how when and why you are in financial troubles and prove that you actually do not have income property or equities to cover your loan payments. It is good practice to be humble and polite when starting short sale process and you are the one who should propose and initiate it if it comes to this.

Keep in mind that while short sale is better choice than foreclosure, even better way is to sell property if possible before you are far behind on your mortgage payments. If you feel you might get in financial troubles, better sell the house by putting it on market as soon as possible and take a good look at your credit card bills – there might be way to optimize your expenses! Hope this article is helpful you got your answer to what does short sale mean!