Dear Ms. Lank: What is a short sale? — K.

Answer: When you owe more on a mortgage than your property is worth, and you need to sell, sometimes a lender will accept whatever you can get on the open market, and forgive the rest. That's known as a short sale. It's better on your credit record than a foreclosure would have been. And the IRS no longer taxes you on the unpaid balance.

First, though, your lender must agree. Often they want proof that you don't have other assets you could use to repay the shortfall. And they reserve the right to approve or disapprove of any offer you want to accept for your place, so it can be a cumbersome and frustrating procedure before you arrive at a binding contract. See the next letter.

Short Sale Frustration

Dear Edith: Is there any way to increase a bank's turnaround time of a short sale? This past Monday we put an offer on a short sale house with a requirement for a response within two weeks. We made a strong offer, near the asking price, will put 25 percent down on a house that has been on the market for way more than a year. It will take almost all our savings for the down payment, but we wanted to make a strong offer, avoid PMI and demonstrate that we were serious.

We put the "respond by" date in the offer; I told our agent to hound the listing agent to, in turn, hound the bank; and we've provided a pre-qualified letter and a $5,000 earnest check.

Are there any other measures we can take for a quick turnaround? My fear is the banks are so inundated with short sales and foreclosures that they don't have time and people to handle them all.

Can you please tell me if it's foolish to get my hopes up about hearing back in two weeks? — Via e-mail

Answer: Your concerns may be well founded. My mail indicates that many lending institutions just aren't set up to handle offers efficiently. It's not like dealing directly with a homeowner or investor.

I've been hearing from a lot of frustrated buyers. Too bad, because that doesn't do much to help solve vacancy problems.

All I can do is wish you good luck — let me know how it comes out, please.

Cash For Houses

Dear Ms. Lank: Can I go to one of these places where they advertise they buy houses, if I have a contract with a Realtor? I want to see if they would give me what is owed on my house since we are having such a hard time selling it. — Via e-mail

Answer: You can talk to anyone you want and sell to anyone you want. But you probably signed a contract promising to pay a commission if the house is sold during the listing period. That means you'd still owe the agent if you sold on your own.

If you can't get your asking price on the open market, though, you certainly won't be offered that much by a "cash today" company. They buy at a discount from market value — why else would they do it? So that's that.

Difficult Question

Hi. I found your column and have a difficult question.

Two years ago I bought a home. The deed, mortgage and bills are in my name only. When I purchased the house my fiancé's father gifted me (and signed a gift form) $5,000 to help cover closing costs. While living together we split all home-related bills 50/50. After two years things went bad and I recently kicked him out.

Now my ex says he is going to sue me for half the increase in value of the home. Also, his dad is going to sue to get back the money he gave me. Do you think that either of them really have a case? Would my ex have a claim to a home he never owned? Can his father sue me for something that he "gifted" to me?

I don't have a lot of money for a lawyer (and have no money to pay them if they would win). Thanks. — Freaked Out

Answer: You must take the question to a lawyer, who will, I hope, say you don't have much to worry about. I don't know where you live, but I can't imagine any property increasing in value enough in the past two years to warrant a lawsuit. Your ex's share of expenses simply covered his residence in the property.

I don't think anyone can take back a gift. But remember, I'm not a lawyer. If your attorney thinks they have a case because of the intention of that gift, perhaps he or she can negotiate some compromise.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

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