What is a short sale?

A short sale is a sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but requires you to leave your home.

If your lender or servicer acting on the lender’s behalf agrees to a short sale, you may be able to sell your home to pay off your mortgage, even if the sale price or proceeds turn out to be less than the balance remaining on your mortgage.

If you live in a state in which you are responsible for any deficiency between the sale price for your home and the amount you still owe on your mortgage loan, you will want to ask your lender or servicer acting on your lender’s behalf to waive the deficiency before you go through with a short sale. The deficiency is the difference between the amount owed on a loan and the total amount collected from the sale proceeds. In some states, after a short sale, your lender could sue you to collect the amount of the deficiency. Getting a waiver of deficiency means that the lender waived the right to collect this amount. If the lender waives the deficiency, get the waiver in writing and keep it.

If you choose this option, a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can help you plan your next steps. Borrowers who are seeking short sales should also ask about help with relocation expenses, either under the federal government’s Home Affordable Foreclosure Alternatives Program (HAFA) or under other private programs sometimes called “cash-for-keys.” The deadline to apply for assistance under HAFA is December 30, 2016. For help in exploring your options call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

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