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Caroline Telford asked:


If you are heading down the road to foreclosure, you may wish to consider a short sale. This can and will at least protect you from having a foreclosure listed on your credit report, but it still may not completely clear you from all of the money owed to the lending company. The most important part of the entire process of selling your home in a short sale is the negotiation that is done with the lending company.

All lending companies have a department that works with sellers for negotiating all short sales. In the majority of cases, the department is known as loss mitigation. If you begin to talk with your lending company before you receive a notice of default, they may just ignore you totally. All lending companies are in the business to make money and if at all possible, they normally want you to repay the total amount of your loan so the do not lose money.

On the other hand, after a notice of default has been issued and records with the courthouse you can then begin the negotiation process. In most cases, you will not have much to do as most companies have pre-determined criteria for these types of transactions. All banks, lending companies, and mortgage companies have the right to deny or accept a short sale. Due to this fact, they are still going to want as much as they can get for the home so they do not lose more money from the loan that is in arrears. Some lending companies will take any reasonable offer.

A short sale may save you from having a foreclosure on your credit report; however, this does not mean your credit rating will stay excellent. Short sales are considered a type of settlement whereas you worked with bank in order to repay a loan that you were unable to pay. This does not look favorable on your credit report; however, it does look much better than a foreclosure. A short sale will stay in your credit history for seven years. In the majority of cases, you will be able to reapply for another mortgage loan within 1 to 3 years after a short sale.

The mortgage company in most cases, will work with the homeowner during a short sale and forgive the remainder of the loan, however, companies that have a lien on the property most generally will not forgive the money owed to them.

Before contacting the lending company, it would be in your best interest to talk with experts on short sales. Selling your home and saving your credit is the number one reason for short sales of homes, if you are still going to be stuck with a huge debt, and then you will not be any better off than before. Instead of trying to do it alone, talk with experts to ensure you are doing everything possible to save your credit and learn the process of short sales.