how do I short sale my house?

This is a very vague question as there are many details involved however the root of it is pretty simple. If you owe more than your home is worth and you would like to sell your house you have two choices... 1.) Pay the difference out of pocket or 2.) ask the lender to allow you to sell the house for less than what is owed to the lender.

Doing #2 is often times a difficult task and there are several different scenarios and options that are available to you however there is one major thing. Unless you are selling the house at a 2% or less loss you are going to need to be late on your mortgage. The reason behind it is this.... Imagine if you had a loan to a friend and they were paying every month like clockwork. One day they called you and said " Hey, I don't want to pay the entire amount that I owe you anymore and here is what I would like you to take."  Most of the time, unless you really needed the money you would say "I would rather have you pay me the whole amount plus interest for the life of the loan and you make payments to me every month.. why would I sell it for less?" Long story short is the bank doesn't have motivation to sell short at a big discount unless you motivate them by not paying your mortgage. It really sucks however that is reality.

Now most people view short sale as a negative things however why would 25% of the nations defaults go into foreclosure and short sell their house on purpose? It comes down to a very interest argument and question of... what is my credit worth? In washington state, if you only have a 1st mortgage and they foreclose and the bank takes your house you have no further obligation to the lender. Now if you have a 2nd mortgage and the 1st forecloses then you could be on the hook for the deficiency judgement and that can follow you for up to 5 years if not settled.

If you have two mortgages and you need to short sell because of financial difficulties or you are just super upside down and your credit is worth less than the 200k you would make by selling your house... definitely stick around, ride it out, and complete the short sale. The MOST IMPORTANT PART are the agents and the short sale negotiator involved. Those two people alone can either save your thousands on your 2nd mortgage or sell you down the river for a commission.

If you would like some local referrals I would be happy to help you with that!

Good Luck!

Fred 

Make sure to work with an experienced agent and a separate facilitation company that specializes in short sales. When your home is a "short sale" these services of what an agent provides and a facilitation company are considered to be paid by the lender, not by the borrower. 

Your hardship needs to qualify for short sale assistance. New guidelines are coming into affect that requires paperwork form agents and other companies to comply with the lender. Also, make sure your listing price is able to comply with the lenders "pre approved" "NET to Lender". This step is missed by some agents or is completely unheard of by most.

Seek unbiased information from a local HUD Counselor. They are usually free to speak with but might ask for a donation to their non profit. 

We work with investors and experienced agents only that advocate a more "accelerated" selling approch compared to the traditional "list and sit" practiced by traditional agents; short sales are not traditional sales.

Fortunately, most lenders are starting to move much faster on short sale approvals.

In conclusion, interview specialized agents and ask for approval letters and a creative strategy. We work in the state of washington with local referral agents. If you would like to learn more about our accelerated approach to this debacle market, please visit my organization's website. We're currently revising our site, so if there is something you had a question about let us know.

Good Luck!

Definitely one starts with the lender.   Here are some short sale basics.  One can't just sell short because the value has dropped, there are some other aspects required to qualify.

While it is prudent to start with a lender, if you look for an agent make sure the agent has significant experience in short sales.

Before you call a Realtor, call your lender. In order to short sale a home where the lender absorbs the loss, you will  need to prove financial hardship. Otherwise you are on the hook for the difference between the sale price and the remainder of your mortgage.

Contact a local Realtor who specializes or has experience in facilitating short sales. You may also want to consult an attorney. There will be quite a bit of paperwork that you will need, so be prepared to do a little work up front.