A short sale is an alternative to a deed in lieu in a pre-foreclosure process.
In this process, the lender agrees to accept the sales price of fair market value despite the loans totaling more than what the property is worth.
The lender writes the loss off.
This process is an excellent way to avoid foreclosure as long as it is done properly by a qualified lawyer.
This transaction stops mortgage foreclosure and prevents the lender from suing for deficiency, the difference between the value under contract and the current sales value.
Your credit report will not be negatively affected by a foreclosure item.
Though this process may still appear in your credit report, the lender has more discretion in recording the transaction to credit-reporting agencies, so borrowing in the future may be less confined.
Since negotiating a sale requires much documents and information to be streamlined, a lawyer is recommended to help work through the process.
Additionally the borrower must convince the bank that currently the borrower cannot make any payments toward the loans in a way that the lender does not assume there might be mortgage fraud.
The borrower must provide financial statements arguing in the borrower's case without lying but illustrating the grim difficulty of making payments.
An attorney will provide the guidance and protection against allegations of mortgage fraud and help in negotiations.
Be wary of predatory companies claiming to be qualified in helping you with your sale.
Come tax time, borrowers must adjust for the short sale.