Short Sales

Simply stated, a “Short Sale” is when the Seller of a property expects to end up owing more to the Lender then he or she will receive from the sale after considering the associated costs of sale such as commissions and escrow fees.

 Why a Seller would agree to such a transaction might seem odd but when faced with the alternatives of foreclosure, a Short Sale may be a better alternative for both the Seller and the Lender.

 Unfortunately, an increasing number of borrowers have purchased homes where the market value* is less than the original purchase price. This is not necessarily a problem provided that the property owner can continue to make the mortgage payments because, over time, it is likely that the property will eventually be worth as much or more.

 When it becomes a problem is when the loan payments cannot be made because of an increase in variable interest rates or other unforeseen events in the owner’s situation affecting his or her ability to keep up the payments.

 Typically when this happens the owner will sell his or her home, pay off the loans and find alternative housing options. But, when the loans cannot be paid off the only options are foreclosure or a Short Sale.

 Given the choice, many Lenders would prefer the Short Sale because in the final analysis, even if the house was repossessed, it could only be sold for the market value and, all things considered, a Short Sale usually ends up costing the lender a lot less in the long run.

 From the borrower’s perspective, the short sale prevents having the foreclosure on the borrower’s credit history, and releases the borrower from an obligation that he or she can no longer afford.

 In essence, a short sale is a sale transaction subject to a lender’s approval in which the lender consents to a sale of the security interest for less than what is owed on the note and accepts the proceeds in full satisfaction of the loan amount.

 A short sale requires much paperwork and preparation on behalf of the Seller and a unique perspective and plan on the part of the Buyer. Typically, before applying for a short sale, the seller must have a ready buyer and all the paper work prepared to present to the lender. The buyer of the property must also be prepared for a protracted time period to conclude the purchase of the property.

 Call me today for more information on how to proceed with a short  sale.
                                                                                                                                                                        

This information is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.