subject: Basic Short Sale Facts And Knowledge [print this page] I've Heard It Before, But What Is a Short Sale?
Finding oneself in the situation of being unable to keep mortgage payments current can be immensely stressful and embarrassing. However, anyone not privy to the real estate vernacular may not realize that there is an alternative to foreclosure proceedings or bankruptcy: short sales. A short sale occurs when real estate sells for an amount less than the current owner owes on the mortgage loan. When a property sells for less than its current value, the sellers lender is accepting a discounted payoff to release the existing home mortgage.
This is very different from a foreclosure, in which a lender obtains a termination of the borrowers equitable right of redemption by court order, or from a REO property, which is a bank owned property that has failed to sell at a foreclosure auction. Although a short sale is typically rather stressful in its own way, it is often a much more agreeable situation than bankruptcy or foreclosure. Nevertheless, as short sales result in losses for the lender, the process of selling a home short is not the easiest process in the world.
How to Go About Selling a Home Short
It is reasonable to expect a certain degree of difficulty in selling a home short, since the short sale process will result in the lender or mortgage investor potentially losing tens of thousands of dollars; many times, it will make more sense from the lenders viewpoint to foreclose. Also, not all sellers or all properties even qualify for short sales. Consequently, in order to get the lender to approve a short sale on a property, the borrower must prove to the lender that he or she is no longer able to afford the mortgage. How is this done? The borrower must submit financial statements to the lender demonstrating his or her inability to keep up with the mortgage payments. This way, there is physical proof of financial hardship causing the borrower to resort to breaking free of his or her mortgage.
Unfortunately, aside from providing the lender with financial information, there really is no standardized short sale approval process. Approval criteria vary from lender to lender and, sometimes, within one institution. In any case, it is a good idea for any mortgager looking to sell his or her home short to consult a real estate agent with short sale experience, an accountant or other tax professional, and perhaps an attorney.
