Short Sale or Not, Part 1:

The Lender

We've talked a bit about the definition of a short sale, now let's get into some specifics that can help you decide whether or not a short sale is good for you. If you're thinking about short sale, then you find yourself having trouble making your mortgage payments, and at the same time can't seem to find a buyer interested in paying you what you need in order to cover the outstanding mortgage amount.

Now, there is some good news for you, because you have had at least one offer on your house (without an offer, you won't be able to get the bank to approve a short sale, which we'll get to in a bit). That offer falls short of what you owe, but it may be your best option; the alternative is foreclosure or possibly bankruptcy, both of which will affect your credit for a long time, and can also cause significant embarrassment.

Deciding to go the short sale route will mean you probably have to be prepared for a significant amount of time commitment and paper work. As mentioned, you will have to have at least one offer to take to your lender in order to prove that it's the best you can get for your home. The lender will probably also want to have the following documentation from you:

Comparative Market Analysis: this will show the lender that it's not just your property which has fallen in value Financial records: the lender is definitely going to want to see that your are truly in dire straits, and not just trying to make up for a mistake on the original purchase, which was too high Personal letter: lenders do have a human face too, and a clear explanation of your situation can sway them into sympathy for your request

Keep all of those documents as detailed as possible, including the closing costs you expect to pay on the transaction, authorization for the bank to contact your agent or consultant, and everything else that has financial bearing on the case.

Those are just the details of bargaining with the lender. Keep in mind that this process can take months, and many buyers lose patience. Still, if you are having a lot of trouble attracting mortgage covering offers, a short sale may be your best bet.