Foreclosure has a negative impact not only on homeowners, but also their neighborhoods and local economy and housing market. One way to avoid foreclosure is with a "short sale," in which the lender is willing to accept a payoff that is less than the balance of the loan. Such a sale still benefits the lender, supports home values, and helps the seller maintain a level of credit.
Because "short selling" is a different process for different types of loans, the expertise of a real estate agent adds value to these complicated transactions. A "normal" sale involves at least two agents, the seller, the buyer, the buyer's lender and other professionals. A short sale involves all of them, plus the seller's lender, counselors, lien holders, insurers and more.
The National Association of REALTORS® has worked to help agents understand and solve the problems involved in short sales, including the piles of paperwork, overextended loss mitigation departments, and appraisals that don't reflect seller duress or recent foreclosures in the neighborhood.
You might consider speaking with an agent about a short sale if you meet three basic criteria: you're behind on payments, you can prove legitimate hardship, and have little equity. With the expert knowledge and guidance of a real estate professional on your side, you have an opportunity to salvage your credit and avoid the pain of foreclosure.