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Helping You Navigate Complex Legal Issues

Understanding a short sale

Gregory A. Lang

Buying a home is often an exciting -- and frightening -- proposition. For many people, it means signing their name to the biggest debt they will ever owe, but it also means owning their own land and property. However, what happens if circumstances change in the future and you need to get out of the home for financial reasons? One possible option is the short sale.

A short sale occurs prior to a foreclosure but often requires the same type of financial circumstances that might lead to foreclosure. In most cases, for example, you must be behind on mortgage payments to be eligible for a short sale process through your mortgage company.

Other situations that might lead to a short sale include the inability to afford monthly payments on your mortgage and the fact that your home is worth less than you owe on it. Of course, if you want to leave your home, the best way would be to sell it for as much or more than you owe, but that isn't always possible.

If you are facing a long-term financial hardship that makes it difficult for you to make your mortgage payment, then you might first want to contact your mortgage company. Home loan modifications are often available to help you deal with such situations. If you are not eligible for such a modification, though, then the lender might agree to a short sale.

When short sales are sanctioned by the lender, they sometimes agree not to hold you liable for any debt left after the sales amount is put toward the mortgage. If you are dealing with a property you can't keep and have questions about your real estate options, speaking with a real estate lawyer could help you understand the best next step.

Source: Fannie Mae, "Short Sale," accessed June 17, 2016

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