Can the bank foreclose on my home if I am preparing a short sale?

The only way a bank can foreclose during a short sale is if the payments are in arrears. A mortgage that is current even though it is in the process of a short sale shouldn't be affected by a foreclosure. Sometimes it's possible to work with the bank to avoid the action by initiating the process of selling short.

Why Prepare a Short Sale

Keeping the mortgage paid and not having a late mark during the process translates into being able to qualify for another loan. Fannie Mae will provide another mortgage as long as the payments were kept up. It's supposed to be an "everybody wins" situation by avoiding a foreclosure filing for the bank, the seller gets out of the house with their credit intact, and the buyer purchases a home for less than the market value. There are some issues that may get in the way, ones that the seller should be aware of.

The bank may not want to go along with the short sale, or want money brought to the table. This could potentially cost the seller their down payment money for another home. Banks also tend to drag their feet, making everybody wait much longer than they would have with a traditional purchase.

Hire Legal Help

A real estate attorney is going to be the best line of defense. They have the know-how on ways to keep the bank's feet to the fire. A lawyer understands the need of the seller to get out of their house and knows how to enforce the seller's rights.