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Short Sale Basics

Short Sale Basics

What is a real estate “short sale”?

Briefly defined, a short sale occurs when a lender agrees to accept less than the full balance of the mortgage as full repayment of the loan when the property is sold.

What are the conditions of a short sale?

To be considered for a short sale, a homeowner and his or her property must meet certain conditions:

  1. The market value of the property is lower than the balance of the mortgage plus closing costs;
  2. The homeowner can demonstrate a financial hardship; and
  3. The homeowner is insolvent – there is no financial ability to cover the shortfall.

What are the potential benefits of a short sale?

Short sales can be a winning proposition for all parties involved:

  • The cost of foreclosure can be far greater to a lender than accepting a reduced loan balance;
  • For homeowners, the credit damage and emotional cost of foreclosure can be significantly lessened by a short sale;
  • Qualified buyers who have the flexibility and patience to see a short sale through to completion can get a great deal.  Short sales are the true bargains in today’s market for the right buyer.

What are the risks and drawbacks of a short sale?

Short sales are difficult waters to navigate.  There are many issues of which sellers and buyers should be aware, including:

  • Short sales can take many weeks to be approved and close, and buyers may lose patience and walk away;
  • Although we try to pre-qualify a property and seller as much as possible, a short sale may ultimately not be approved for circumstances that are out of anybody’s control;
  • There may be financial consequences to the seller (although currently the government is working to reduce these);
  • Properties are sold as-is and the seller is generally unable to make repairs;
  • Lenders will rarely accept sale contingencies other than financing and inspections.

What is NOT a short sale?

Unfortunately, a short sale is not a “Get Out of Your Mortgage Free” card for sellers who are upside down on their loan.  Unless a homeowner is in or headed for foreclosure, can prove a hardship and cannot afford to cover the shortfall, waiting out the market or bringing cash to closing is the only option.

I think I qualify. So how do I get started with a short sale?

First and foremost, get qualified help!  Whether buying or selling, you need an experienced and knowledgable team to help you with this process. If you are experiencing trouble paying your mortgage, or soon will be, contact us to see if a short sale can be a solution for you.

Short Sale Info for Sellers

Short Sale Info for Buyers