Options

• If you are trying to avoid a short sale, one of your options is to pay the difference between the sales price and the mortgage. If you sell the house without working out any arrangement with your bank, you will be financially responsible for the difference. For a small differential this may be a good option. You will maintain your good credit rating while still getting out of your current home. The other option is a short sale. Homeowners must be approved by their lender for a short sale. This means that the bank is willing to release you from your loan obligation for less than the remaining balance of the loan. A short sale will appear on your credit report and affect your credit rating.
  
  

Short Sale

• While a short sale will solve your problem in the short term, it does have long ranging consequences. A short sale will appear as a ding on your credit report and affect your credit rating. The bank is effectively releasing your from a financial obligation and considers it a variation of a default on the loan. This may effect your ability to qualify for another home loan in the future. A short sale also puts the bank in the driver's seat in all negotiations with potential buyers. The bank gets to make the ultimate decision on whether an offer is accepted. It may take longer to sell your house in this scenario.
  
  

Approval

• Once you have made the decision to short sale, you will need to work with your bank for approval. The best candidates for short sale approval are borrowers who have good credit but are not able to afford their current payment or the difference between the homes value and the current balance on the loan. Before calling your lender, collect all of your income information for the last two years. It also is important that the homeowner know the current value of the home. A real estate agent or broker can give an estimate of the projected sale price and provide recent comparisons in the neighborhood. Only your lender can tell you if you are a candidate for short sale.
  
  

Selling Your Home

• A realtor is an important tool in working through a short sale. A realtor who specializes in these types of sales is a good choice for a homeowner trying to get her home sold quickly with a short sale. Work with a realtor to understand what your home is worth and what the lender is willing to accept. The lender will have the final say in the negotiations and will authorize the final sale price. This process may take months and may limit your ability to buy another home while you are still financially obligated to your current mortgage. Homeowners are required to disclose the home's short-sale status to all prospective buyers. The homeowner should work closely with the broker and the lender to understand their role in the sale proceedings.