The housing market is definitely a buyer’s market, but unfortunately many who bought into the incredibly low interest rates and variable mortgage rates now are feeling the pinch. Too many have found themselves “upside down” – left with a home worth considerably less than the current mortgage. This is a major financial problem, and one that has but a few possible resolutions.

Far too many simply cut their losses, await the bank to foreclose and walk away. This creates a serious problem with lending and banking in general, but it unfortunately happens frequently. Many people are willing to take the serious credit downgrade, seek to start anew and try to rebuild their lives as best they can. The market is glutted with homes in foreclosure as banks seek to recoup their investments, but as many who originally borrowed more than they could fiscally afford, the homes sit, empty, and waste away.

There is another option. One that will not only protect the consumer’s credit but also keep the lending institution satisfied. The owner has an opportunity to sell my house at far below market value, but the lending institution will accept a selling price lower than the current mortgage. This is called a short sale and can save a person’s financial future.

Left with few options, sell my house becomes a reality that many will have to accept. The actual process of a short sale is, however, one that is considerably more difficult than a normal home sale. The reason lays with the lien holders.

A lien holder is someone or something that has a financial interest in the home. This can be the bank, originator of the mortgage, plus any special lien holders like homeowner’s associations or second mortgage companies. Each of these entities will have to provide a release to the homeowner before a short sale can commence.

The homeowner will have to provide documentation of financial hardship to each institution. Normally a letter explaining a particular hardship is necessary. Unfortunate, drastic situations such as catastrophic accidents, job losses or similar will be acceptable grounds for short sales. Dishonest or illegal behavior, however, is not acceptable grounds and will likely be denied.

Once the seller has secured permissions from the various lien holders, the home goes on the market. A potential buyer may make offers that appeal to the seller, but the lien holders have the right in all final decisions on the sale. This is why securing permissions from all lien holders is vital. A second mortgage company is likely to lose any vested interests in a short sale. Without their expressed permission, no sale will take place.