What is a Short Sale?
I’m going to make this a two part blog. First, I’ll explain what a short sale is and how the process works. Then, next week, I’ll tell you about possible ramifications and other parties involved. A short sale is a sale in which the proceeds from selling the property is less than the balance of debts secured by liens (mortgages) against the property and the property owner cannot afford to repay the liens’ full amounts. The lien holders then agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. This is when it might be good to speak with an attorney (Vernon Guirguis) to help negotiate a waived deficiency. Simply put, if you owe more on your mortgage than your house is worth, you may be a good candidate for a short sale.
A short sale is often used as a successful alternative to foreclosure because it alleviates additional fees and costs to both the creditor and borrower. While credit is typically damaged much less as a result from a short sale, rather than from a foreclosure, both often result in a negative credit report against the property owner.
Most creditors require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency. If you’re thinking of going the route of a short sale, one of the most important aspects for the borrower in this process is putting together a proper real estate short sale package including hardship letter explaining why a short sale is needed. Your real estate agent or attorney can help you with this.
Most large creditors have special loss mitigation departments that evaluate borrowers’ applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process includes the creditor(s) determining the current market value of the real estate by obtaining an independent evaluation of the property with an appraisal or a BPO (Broker’s Price Opinion).
Due to the overwhelming number of defaulting borrowers due to mortgage failures and other causes as part of the 2008-2012 global financial crisis, many creditors have become proficient at processing short sales applications; however, it can still take several months for the process from start to finish, often requiring multiple levels of approval.
I am highly experienced with Short Sales and would love to answer any questions you may have. You can also see a current list of all short sales and foreclosures on the market!
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Realtor® | SWFL Region
Treeline Realty Corp.
239.292.9404 (c) | 239.989.0138 (f)
“Buy or Sell…Think Pell!” ™
Posted on May 31, 2012, in Real Estate and tagged Agreement, Appraisal, Borrower, BPO, Broker's Price Opinion, Buy a Home, Buyer, Credit Report, Creditor, Debt, Default, Deficiency, Economic Hardship, Financial Hardship, Foreclosure, Global Financial Crisis, Hardship Letter, Hardship Package, Kristen Pell, Lawyer, Lender, Lien, Loan, Mortgage, Real Estate Biz, Realtor, Seller, Short Sale, Short Sale Application, SWFL Real Estate, Vernon Guirguis. Bookmark the permalink. 1 Comment.