Short Sale, If Allowed, Could Avoid Foreclosure

Your proposal should also include your financial situation. If you lost your job, include proof with the letter.

The more documentation you can provide the lender, the faster the decision will be. However, lenders are swamped with these requests; you are not the only one facing a possible foreclosure. The earlier you can start the process, the better chance you have of getting the short sale approved.

But the lender's approval to proceed with a short sale does not end the process. When you or your real estate agent find a prospective buyer, the contract must state that it is contingent on lender's approval. You have to send the contract to the lender; it would help to include an accounting of all expenses that you will have to pay at settlement, as well as the final number that the lender would receive at settlement.

A HUD-1 settlement statement would expedite the process. Your lender will then review the documentation and may reject certain expenses. For example, if the contract provides that you will give your buyer money toward closing costs, or that you will pay some items that are traditionally the buyer's obligation, such as title search and survey, the lender may not allow such payments.

You want to go to settlement knowing all of the terms and conditions on which your lender will accept the short sale, including whether you will have to come up with money at the settlement table.

You are in financial trouble. If you have missed some payments, your lender may already have notified the credit-reporting companies. You can try to persuade the lender not to report any more delinquencies, but that is at the lender's discretion.

The short-sale process works but is complicated, time-consuming and uncertain. If you can start now, before you are in default, you will be ahead of the game.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, http://www.kmklawyers.com.