Selling your home by short sale has received extended life for 2013 under the Mortgage Forgiveness Debt Relief Act. When loan modification has been ruled out in your situation, and if you want to avoid foreclosure, a short sale by which you pay the lender less than what is owed on your mortgage can be a viable option. If you complete a short sale by the end of 2013, the outstanding balance owed to the lender won’t be charged against you, and you will have no income tax liability. However, you cannot do a short sale by yourself, as some states require you to work with a short sale specialist.
Contact the asset manager for your property who works in your lender’s loss mitigation department -- getting through to the right person may prove difficult and takes perseverance. Inform her that you want to short sale your home and ask for the lender's letter of authorization. Request a short sale package be sent to you.
Describe your financial hardship in your hardship letter to the lender to start on the path of a short sale. State that you can no longer afford your mortgage payments and verify the reasons. Gather your bank statements for the past three months, pay stubs or other proof of income and any paperwork detailing your present financial status. Ensure that all of your assets and liabilities are listed on your financial statement.
Contact your local real estate brokerage and get a referral for a short sale specialist, as some lenders require a specialist to guide the transaction. Submit your letter of authorization to the agent. Avoid newspaper advertisements touting the benefits of “fee based” short sale help as there's no reason to pay an upfront fee to anyone to list your home as a short sale.
Request a comparative marketing analysis of homes in your neighborhood that have sold in short sales the past six months from your real estate agent. Review the market analysis and consult with your agent to determine your home's best asking price. The lender must approve the price before you officially list your home for sale. The asking price gives buyers an idea of where to start in the negotiating process.
Attend the closing when you sell the home as you'll be required to sign the paperwork. Follow-up with the lender to ensure it release you from liability for the remaining balance of the mortgage.