Short sales can only happen when all lien holders agree to the short sale. Lenders that have more than one mortgage on the property are taking a loss and will be seeking to receive a specific amount of what is left over from the short sale after all of the other costs have been paid. Since there are often not enough funds to pay off all of the lien holders, it can often become necessary to engage in various negotiations.
Sellers are often unwilling to give up their homes and will therefore be uncooperative throughout the short sale process. Sometimes, the seller is required to make a final payment and refuses to make this payment. This can lead to the short sale being refused and failing to close.
For a seller to be granted a short sale, there must be a hardship. If the seller is in the same situation as when he or she first took on the mortgage, the lender is very unlikely to grant the short sale. Instead, something must have changed that must then be detailed in a hardship letter. Also, the seller must explain the things that he or she has done to try to resolve the hardship and why none of the measures have worked.
Be Prepared for a Deficiency Judgement
After the short sale has been completed, the bank will often be allowed to seek a judgment against the seller for the deficiency. Under these circumstances, you will still be held responsible for the difference between how much you owed and how much your home was sold for. If you do not want to have to pay the deficiency, you can negotiate to have a waiver for the deficiency. You can also file for bankruptcy, which will cause the deficiency to be discharged.
If you are required to pay for the deficiency, you can choose to seek a settlement for the deficiency. Then, you will be allowed to pay for less than what you owe. You may also not be required to pay a deficiency judgment at all if your state has laws against deficiency judgments after a foreclosure.
Encourage Both Lenders to Enter a Short Sale
If you have had a mortgage with more than one loan, it can be difficult to engage in a short sale. One bank might agree to the short sale, but the bank may only agree to pay the lender a certain amount. Therefore, you will want to try to encourage the second lender to also take on a short sale to receive the maximum compensation.