A short sale home involves property that is in the process of being foreclosed. Although the bank has not yet seized the house, borrowers have little time before losing their property. Lenders will occasionally allow the homeowner to sell their home for less than they owe on their mortgage note through the process of a short sale.

Purchasing a short sale home is basically the same as buying any real estate for sale. The sale of these properties is generally facilitated by a realtor. The homeowner is required to work with an assigned bank loss mitigator.

An employee of the bank, loss mitigators act as a mediator between the seller, buyer and lender. They also assist the borrower throughout the short sale process and provide guidelines which must be strictly adhered to.

Each mortgage lender institutes protocol for establishing short sale approval. Many lenders will accept the purchase price as payment in full toward the delinquent mortgage note. Other lenders require the borrower to repay the difference between the purchase price and loan balance.

If the borrower is unable to pay the difference at the time of the sale, the bank will issue a Deficiency Judgment. These judgments wreak havoc on the borrower’s credit history. This black mark prohibits borrowers from obtaining another mortgage for years to come. The judgment remains in place until paid in full.

Borrowers should give careful consideration to the long term affects when lenders issue deficiency judgments. Depending on the amount owed, it might be a smarter financial decision to allow the home to fall into foreclosure.

When foreclosure is looming, borrowers should request a Deed in Lieu of Foreclosure. This allows borrowers to return the house to the lender and walk away from the property without owing additional money. The homeowner will lose all monies vested in the home and cannot receive sale proceeds if the property sells for more than is owed on the loan.

Borrowers must obtain short sale approval from their lender before they can sell their house for less than is owed. Since the bank is accepting a financial loss on the property, borrowers will be subjected to financial scrutiny. Banks require borrowers to submit a short sale packet and provide substantial financial documentation.

Banks accept approximately 10-percent of short sale requests. Homeowners can improve their chance of obtaining approval by working with a short sale specialist. Some realtors have received training in the short sale process. A few real estate investors have been trained in this niche as well.

Borrowers who need to sell their home to satisfy a short sale agreement should consider locating private real estate investors. Many investors purchase homes with cash to obtain additional negotiation power and quickly close the deal.

Locate real estate investors by conducting research online. Attend local real estate investment networking meetings. Check the Classifieds section in newspapers and real estate publications. Ask friends, family or co-workers for referrals.

Many people think you save money by buying a home that’s a short sale or foreclosure. That’s not necessarily true. Even if you do save money on a short sale it can take longer to close on escrow. California real estate agent Charlotte Laws talks about saving money with short sales or foreclosures.

A short sale hardship letter is perhaps the most important letter any homeowner will ever write. The letter of hardship allows borrowers to present the circumstances that caused them to become delinquent on their mortgage note.

When writing a short sale hardship letter, it is important to remember the letter will be read by a human being. Banks employ loss mitigators to work as mediators between borrowers and lenders. Although loss mitigators do not make the decision to approve or disapprove a short sale request, they do have considerable input.

The words and emotions expressed within the hardship letter can sway the loss mitigator to help borrowers obtain short sale approval. This is not to say homeowners should fabricate misfortunes. In fact, people who lie in order to obtain short sale authorization could be charged with a criminal offense.

It’s always a good idea to draft an outline of the letter of hardship. Most people find they need to write this letter several times before obtaining their final version. Start by creating a timeline of the events which led to your inability to pay the mortgage. Then, write out a detailed description of these events and how they affected you.

Keep in mind that banks don’t like losing money. Many people believe a short sale means they can sell their home for any price they want and write-off the remainder of their mortgage balance. Most banks only allow borrowers to list their real estate at around 10-percent under market value and require the sale be facilitated through a licensed realtor.

The following is a sample short sale hardship letter. While each lender requires their own format, this will give you an idea of what banks are looking for.

Dear Lender,

We are contacting you today to request short sale approval for our property located at 1212 Sunny Lane. Unfortunately, we have fallen on hard times and are no longer able to meet our mortgage obligation.

We purchased our home in March 2006. At the time, I was employed as a construction supervisor and my wife operated a licensed daycare center from our home. In April 2007, I was involved in a car accident and had to undergo multiple surgeries. I was unable to return to work on a full-time basis for over a year.

In August 2007, my wife was diagnosed with breast cancer. Due to her treatments and hospitalization, she had to close the daycare. This caused us to lose over $2500 in income each month.

In December 2007, the company I worked for went out of business. Not only did we lose my income, we also lost our health insurance. We were unable to find an insurance provider who would pay for my wife’s treatments because they were considered pre-existing.

Although we were able to obtain some financial assistance through the hospital, we had depleted our savings account by June 2008. My wife has recently been able to reopen the daycare, but at this time she is only able to care for three children. Currently, she brings in $900 per month.

My unemployment benefits run out in June of this year. I have yet to find fulltime employment, but work odd jobs when I am able to find them. Our combined monthly income is around $1700. Considering our house payment is $1450 per month, I believe you can see why we are unable to cure our arrearages and become current.

We sold my wife’s car and my motorcycle so we could continue paying for medical treatments. We have enrolled in budget billing through our utility company and eliminated extra features on our phone and cable. We shop at discount grocery stores and utilize coupons whenever possible. We do not go out for dinner, go to movies, or engage in frivolous spending habits. However, we simply do not earn enough to make ends meet.

Obtaining short sale approval would eliminate a tremendous amount of stress and allow my wife to focus on improving her health. We greatly appreciate the opportunity to participate in a short sale and thank you for taking time to review our situation.

Sincerely,

John and Jane Doe

If you are delinquent on your mortgage and feel a short sale would benefit you, you must contact your lender to discuss this option. Not all banks engage in short sales; nor are they required by law to authorize this type of real transaction. Therefore, it is crucial to be respectful and not lose your temper when talking to the loss mitigator handling your case.

Once a short sale is authorized, you must work closely with your lender and provide requested documents in a timely fashion. Even more important, you must learn how to write a hardship letter that is compelling, factual and concise. Doing so can greatly increase your chances of success and potentially free you from your mortgage loan debt.