Is a Short Sale right for you? 7 options to help you decide. Notes for a Realtor to give proper counseling.

How to Diagnose a Short Sale

To help sellers navigate the difficult world of distressed sales, you must be able to identify and evaluate all of

your client's options.

Lori Cox, ABR®, CRB, who instructed a full-day foreclosure seminar Wednesday in Orlando, said that sellers

generally have seven options:

1. Refinancing

2. Selling and bringing cash to closing to cover the loss.

3. A lender workout.

4. A deed in lieu of foreclosure.

5. A short sale

6. A foreclosure.

7. Simply walking away.

"Walking away is never the best option but it might be their only option," Cox said.

Which option is best for your client? To find out, "you have to be a diagnostician and you have to be a

technician," Cox said.

To diagnose the situation, work with sellers to answer the following questions:

Are they current on their payments?

If not, how far behind are they? Sellers who are only one or two

payments behind are in the best position to negotiate with a lender.

Do they have savings to pay off the loss?

If sellers are under water on their mortgage-meaning they owe

more than the house is worth-they'll be able to protect their credit if they can pay off the remainder of the

mortgage.

Are they facing a hardship?

If it's a temporary hardship, a lender might grant forbearance. If it's a long-term

hardship, the sale could be qualified for a short sale.

Being a technician, meanwhile, means helping sellers put together a short-sale package that'll pass lender

scrutiny. "They need more paperwork to get out of the loan than they needed to get into it, and you have to

prepare them for that," Cox said.

Legal advice should be obtained for several of these options and careful consideration should be given.