In a short sale, the homeowner retains ownership of their property up until the final closing date of the sale. They may have missed a couple mortgage payments and are at risk of foreclosure if they don’t sell their home or resolve their financial difficulties. Short sales are sometimes called “pre-foreclosures” for this reason.

In a foreclosure, the homeowner is evicted and the mortgage company takes ownership of the home. Foreclosure proceedings typically start after 3 or more months of missed payments, but it could take several more months before the foreclosure is finalized.

The foreclosure process is time consuming and expensive for the mortgage company. In most cases, they would rather take a loss on the sale of your home rather than go down the lengthy and unpredictable judicial process of a foreclosure.

First, the house couldn’t fetch an adequate sale price to cover the mortgage balance. This happens when the home needs a lot of work, or when the local real estate market has declined.

Second, the homeowner needs to demonstrate that they are experiencing a financial hardship.

A financial hardship is a situation beyond your control that prevents you from being able to pay your mortgage. Some examples of hardships include: Job loss or reduced income, divorce, death, medical emergency, job transfer, new variable loan rate, military service, or unexpected major home expenses.

First, contact a real estate agent with extensive short sale experience in your area. Experience is critical here. If you live in Washington DC, Maryland or Virginia, Marc Dosik of the Fed City Team has the experience and success rate you need.

Your short sale agent will assess your home to determine if you qualify for a short sale. Then they’ll connect you with an attorney who is also experienced in handling short sale transactions.

Your real estate agent will list your home for sale and your attorney will work with you on putting together the necessary paperwork. When a suitable offer comes in, they’ll successfully mediate the transaction with your mortgage lender and negotiate the best terms on your behalf.

Short sales should cost the homeowner $0 out of pocket. The real estate commission, attorney fees, and closing costs are paid for by your mortgage company. There’s no reason not to hire experienced professionals to oversee this process – the cost is free to you.