WHAT IS A SHORT SALE?

DEFINITION:  A short sale is a sale of real estate in which the proceeds from the sale fall short of the actual balance owed on loans secured by the property itself.

In a short sale the Bank or Mortgage Lender agrees to accept a reduced amount from the actual loan balance due because of a financial hardship on the borrower/mortgagor.

The homeowner (borrower) then sells the mortgaged property for less than the outstanding balance of the loan turning over all proceeds of the sale to the lender, typically in full satisfaction of the debt. 

The lender has the right to approve or disapprove any proposed short sale.  And, extenuating circumstances can certainly influence the degree of the lender’s loan reduction and participation in the costs of sale.  Local real estate market fluctuations are also an important factor. 

A Realtor with Short Sale expertise is highly recommended to negotiate with any lender’s workout or loss mitigation department.

WHY A SHORT SALE?

Homeowner advantages to the short sale process include avoiding foreclosure and the long-term (up to 10 years) negative remarks on credit history reports. 

While a short does adversely affect one’s credit score, short sales remain on credit reports for less time than a foreclosure, but can be up to 7 years.

However, depending upon other credit information, it is possible to obtain another mortgage within 1-3 years after a short sale.  With a foreclosure, the wait time is typically double, and for investors, not until the foreclosure drops off the credit report in 10 years!

IMPORTANT FACTORS

The typical short sale homeowner is suffering some degree or form of financial hardship.  For example job loss, decrease in compensation pay, job transfer, divorce, medical hardship or a combination of these factors making it difficult to make the required mortgage payments.

While each case is different, the homeowner is almost always allowed to stay in the home even if not making payments to the bank while working on a legitimate short sale.

It is important that the homeowner be working with a professional Realtor who has a working knowledge of the process, the property and the local real estate market.  The agent should list the property, aggressively priced, submitted to the Multiple Listing Service, obtain a bona fide offer, and be ready to negotiate with the lender’s loss mitigation department.

Remember it is not the homeowners’ fault that the economy is weakening and resulting in financial hardship.

A short sale allows the homeowners to sell their home without the burden or stigma of a recorded foreclosure or the lender pursuing a deficiency judgment.  Relatively speaking, a real benefit to the homeowner.

FREE CONFIDENTIAL ONE HOUR CONSULTATION

CONTACT

ATTORNEYS REAL ESTATE SERVICES

HOWARD HARMATZ

ATTORNEY AT LAW

22312 EL PASEO, SUITE “H”

RANCHO SANTA MARGARITA, CA 92691

(949) 470-7810                EMAIL: howardharmatz@earthlink.net