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A Short sale of a property, is the process of selling your property for an amount less than what is owed to the lender, with the lender's approval of the sale.

This process is generaly used to prevent foreclosure, or when a property is worth less (or can only sell for less) than the amount owed on the mortgage to the bank.

Many homeowners purchased their houses with adjustable rate mortgages, interest only loans, and even negative amortization loans. These home loans don't provide for any payoff of the principle balance, and the monthly mortgage payments fluctuate and/or increase over time. Adding to these increasing monthly payments, are property taxes, and homeowner insurance.

Other homeowners have lost jobs, had death in the family or other unforeseen situations that have had devatating affects on their financial situation.

Do you have a short sale house that you need to sell fast? Complete our We Buy Homes form today.

Short Sale is better than foreclosure

The result of a foreclosure is the bank taking your house. Not only will you lose your house, but the lender can get a judgment against you for the arrearages you owe plus their costs for the foreclosure action, this is called a deficiency judgement.

If that isn't enough, your credit report will be is terrible condition for many years to come. This only makes a bad situation worst, making it very difficult to obtain any other kind of credit, car loan, or even rent a home. There is no upside to foreclosure. It should be avoided at all costs.

Disadvantages to a Short Sale

Completing a short sale will prevent foreclosure. But it also has it's negative impact on your credit report. Since you are not making any payments on your mortgage, your credit report will reflect late payments on mortgage loan, lowering your credit rating by 100 to 200 points (there are ways of repairing your credit later).

The IRS allowed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the homeowner never saw a dime of it.

There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.

When to do a short sale

The best time to start the short sale process is before you fall behind on payments, but anytime is better than not doing anything at all.

For the lender to complete the foreclosure process takes time, approximately 4 to 6 months. It also takes time to complete a short sale. Trying to start a short sale at the last minute could cause the lender to foreclose on the property prior to the completion of the short sale.

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Why lenders approve Short Sales ?

The lender has to incur expenses to complete a foreclosure and take the property back. These expenses include attorney fees, court fees, and the lack of income from your monthly payments. Lenders also face unforeseen losses from damage to the property, vandalism if the property is vacant and then the additional costs of selling the property. Along with the expenses come the risk of the property depriciating further, and having to hold the property on the books for an undetermined amount of time.

In certain situations a short sale is less expensive than having to conclude the foreclosure process.

What lenders look for during a short sale

Remember the reason a lender will approve a short sale is because it will benefit them, not you!

The lenders needs to know that if they don't approve the short sale, they will have to foreclose on the property and that the sale is more cost effective than foreclosing.

The lender wants to know why you are not able to make monthly payment obligations, that you are making an attempt to sell the property and repay your debt. Normally the properties must be listed with a Realtor!

Just complete our Sell House Form for a quick response.