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What's a Short Sale? (And How Do I Get One?)

Travis Hamel Olsen is president of National Short Sale Center and COO of Loan Resolution Corp., both Scottsdale, AZ-based companies that specialize in short sales. They serve as an intermediary between all the parties -- realtors, sellers, buyers, banks -- during the long, hassle-filled process.

Travis read up on Leah’s case, and had a few things to say:

"Leah has done a good job at being patient and keeping a level head, while going through a very challenging time in her life. It’s never easy to accept that living in the home you own is no longer an option.

If Leah truly cannot afford her mortgage and has already tried speaking with her bank about modifying her loan (which would reduce her monthly payments), then, in my opinion, a short sale is likely her best option.

Just a few years ago, most people had never heard of a short sale. However, as real estate values plummeted and jobs got slashed, more Americans began struggling with their mortgage payments. The situation made it extremely difficult for many homeowners to even sell their homes at all. Foreclosures piled up -- in 2008, they were 81% higher than the year before. Homeowners and banks both needed a solution.

Enter the short sale. Basically, in a short sale, a troubled homeowner gets permission from a lender to sell a house for less than the value of the mortgage and closing costs. The owner avoids losing the home to foreclosure; the bank avoids adding another home to their lists of repossessions.

It’s not a great place to find yourself, but it’s certainly better than foreclosure, which is what Leah was facing. While a short sale will damage her credit, a foreclosure would damage it far more.

Leah and Eric could have avoided some heartache by learning more about the process before they went through it. Even now that their short sale is approved, for example, they should encourage their real estate agent to obtain backup offers. Sometimes buyers back out for various reasons, so getting backup offers would be a good idea at this point.

If you’re considering a short sale, keep these tips in mind:

Be aware. Appearance counts. Keep your home and landscaping looking fresh and inviting. Inspections are important. Whenever possible, leave utilities on so buyers may conduct inspections.

Be patient. It takes time for your lender, and their investor, to review your short sale request. While many lenders are moving faster, 8-12 weeks is not unrealistic.

Be prepared. Now is the time to begin compiling financial documents including: current pay stubs, two years of asset statements (retirements, stocks and bank statements) 1040’s & W-2’s. Provide updates every 60 days. Specialty loans and government loans may take longer to process short sale requests and may require homeowner counseling.

Be responsible. Whenever possible, pay your taxes, HOA dues and utilities. If you can pay something to your mortgage lender, do so. A good faith payment goes a long way, and allowing a mortgage to go into “Collection,” “Recovery” or “Charge-off” status only hurts the chances for success with a short sale

Be present. Occupy the property, whenever possible; keep your primary residence as your primary place to live. Once a property is vacant, many lenders will use their legal right to preserve the property; the lender can change the door locks and secure the property, slowing down the process of selling your home.

Be responsive. Respond to e-mails and phone calls from your realtor and lender. Read your mail, answer your calls, don’t wait until the last minute to seek help. The sooner you start the process, the better chance of success you’ll have.

Be smart. Always seek professional advice from a qualified attorney and an accountant specializing in short sales or pre-foreclosure Sales. Before hiring a realtor, ask her or him how many short sales they’ve handled. This is complicated stuff, and experience counts.

Be optimistic. Life happens, make peace with yourself and your lender over the process. Life brings many changes -- let go of the guilt and more forward, it will help relieve some of the stress."