what is a short sale?

Asked by , Wed Oct 8, 2008

Can you plase explain the short sale prosces. are there goods and bads for a seller?
Thanks.

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7
Mario Villag…, , Burbank, CA
Wed Oct 8, 2008
BEST ANSWER
In a nutshell a short sale is when the home is being sold for less than what is owed to the lender and the seller can not pay for the difference. Although the seller may agree to a sales price all terms and conditions must be approved by the lender. There's pros and cons but for everyone it is different and a seller should consult a real estate or tax attorney to see how it would affect them. For the buyer it is another opportunity to get a property at a discounted price if the lender agrees but the process is a very long one so you must be patient.
1 vote
Ruth and Per…, Agent, Los Gatos, CA
Mon May 7, 2012
Hi Maggiegatmaitan,

A short sale is when a property sells for less than what the outstanding loans are.

Hence, say a person bought a home for $1 about five years ago with 10 cents down
and borrowed 90 cents. Hence, the loan amount is 0.90 cents

Today lets say the property is worth 60 cents.

Hence, if the seller sells today, the seller is short at least 30 cents plus sales costs and any other dues that have not been paid.

Let me know if I can answer any other questions or refer you to.

Perry

http://www.ruthandperry.com/

http://www.trulia.com/blog/perry_mistry/
0 votes
Paul Drecksl…, Agent, Glendale, AZ
Mon May 7, 2012
First thing's first... A Short Sale is NOT a foreclosure. A Short Sale is NOT an REO.

A Short Sale is an alternative to a foreclosure or REO. A Short Sale is a process that owners and lenders can use to avoid foreclosure.
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Oct 20, 2008
As a seller you need to be approved by your bank to even do a short sale, not everyone is approved. secondly be prepared and educated aboutthe difference between what you owe and what teh house sells for, know up front if you will have to pay this back or be responsibel for the tax burden for any write off. it is a long process that could take 3 to 6 months. the seller needs to actively assist the short sale if it is to work.
Web Reference:  http://www.ScottSellsNH.com
0 votes
Paul Welden, Agent, Scottsdale, AZ
Mon Oct 20, 2008
HI Maggie,

On my website, I have a section dedicated to short sales (often called pre-foreclosures). I invite you to click the link below & learn a bit about these crazy real estate transactions.

---
PAUL WELDEN
Buyer's Agent REALTOR
HomeSmart Real Estate
0 votes
Keith Sorem, Agent, Glendale, CA
Wed Oct 8, 2008
Hi Maggie
Thank you for posting a great question. And from Glendale, too!

When a homeowner has a problem making their mortgage payments, a couple of issues come up.
Usually something happens that causes a gap between how much money you have and the amount needed to make your mortgage payment. Sometimes it is the fact that the mortgage had a "teaser" rate that adjusts to "market rate", and for some people that means their mortgage payment doubles.

For other people it is commonly job loss, death of a family member, medical bills, and divorce.

The first question is "do you want to remain in your home?". Asking a lender to modify the terms of your loan is a good route to follow if you think you can handle the payments if they are lower. Some lenders will cooperate, some will not. You will need to document your income, sort of like applying for a loan.

If you are going to be unable to make even a reduced mortgage payment, then a short sale is the next option. This occurs when you sell a property and the proceeds from the sale will not cover the mortgage payoff and closing costs. In this case you need to make a case to the lender that your financial situation has changed and although at one time you did qualify for the loan, due to circumstances beyond your control you are no longer able to make the payments. The BESt solution for the lender is to allow you to sell the home at a loss. This means that they lender will take a loss of probably 10-40% of the loan value. That is a big loss, so they ask for a "hardship letter", also a financial statement so they can see your liabilities and assets.

Some lenders will agree, some will not. If they do not agree then foreclosure is the last step.

I would be happy to answer any other questions you may have, you can contact me via my Trulia profile.
0 votes
Linda Niehuus, Agent, Brenham, TX
Wed Oct 8, 2008
The " pros" for a seller may include being able to sell without having to go through a foreclosure, which of course is damaging to one's credit. If a seller is facing that possibility, then the first thing to do is talk to your mortgage company. Typically, they don't want to be in the real estate business and hold properties...so they will work with a seller to avoid foreclosure.

The "pros" for a buyer include being to purchase a property at market value or below. Once of the "cons," however, is that the process can take longer.

Hope this answers your questions. If not, feel free to email me at:

Linda Niehuus
lindan@heritagetexas.com
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