How to Stop a Short Sale

Short sales are a way of avoiding foreclosure.

Short sales are a way of avoiding foreclosure.

A short sale of real estate property takes place when a homeowner sells his home for less than the debt balance owed on the property. The short sale process starts by filling out an application through your lender and showing some form of financial hardship that prevents you from paying the deficiency on your mortgage. This type of sale is typically a last case resort before foreclosing on a property. During the recent financial crisis, short sales have gained appeal among consumers, and closings on these deals are taking place more rapidly. However, certain events initiated by the seller can stop a short sale from taking place.

Request a loan modification. The Home Affordable Modification Program (HAMP) encourages prospective short sellers to attempt a loan modification before they initiate a short sale. If a loan servicer persuades a seller to consider a loan modification and the seller agrees, any short sales in process are terminated and the loan modification process begins. Sellers can't seek a loan modification, for example, to lower monthly mortgage payments while conducting a short sale; you must choose to do one or the other.

Resubmit a previously closed short sale file to be reopened as a loan modification. When a short sale file is closed, it is possible to resubmit and have the file opened as a loan modification. A short sale file can be closed if there are discrepancies between the titleholder of the property and the mortgage borrower that result in a violation of the original loan agreement. A short sale file can also be closed if all the parties involved can't agree on the debt renegotiation amount.

Allow the 14-day period in which the Home Affordable Foreclosure Alternatives (HAFA) Short Sale Agreement (SSA) must be returned to expire. A loan servicer submits a proposed SSA to the borrower/seller and requests that the document be signed and returned within 14 days of the document date. If the signed document is not returned by the deadline, the servicer has the right to refuse to consider a HAFA short sale even though regulations allow the servicer to consider the short sale despite the missed deadline. When the property misses the short sale deadline, it may very likely end up in foreclosure.


About the Author

Eileen Rojas holds a bachelor's and master's degree in accounting from Florida International University. She has more than 10 years of combined experience in auditing, accounting, financial analysis and business writing.

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