Short SalesShort sales are hailed as the answer to the current mortgage crisis. Generally speaking, a short sale is little more than the lender agreeing with the borrower to accept an amount that is less than the currently outstanding balance of the mortgage. A short sale is usually a negotiated agreement between a borrower and a lender to discount a loan based on economic or financial hardship to the borrower. In turn, the house will be sold at a price determined by the lender, at which point the lender will receive full proceeds of the sale. The lender will treat the payment as though the note was paid in full, and both lender and borrower walk away from the loan. However, because short sales are in actuality a mitigation of a negative situation, this also has implications for the actual real estate transactions since the potential buyer is not negotiating with the seller directly but instead with an agent of the bank. At times this has been known to add a lot of delay in the proceedings and some buyers have walked away from such transactions simply because they did not want to deal with the intricacies of such a more complicated transaction. Even as not every buyer will eye this opportunity as desirable, some are willing to jump on these short sales. Perhaps this is the reason why it is so surprising that there are comparatively few homeowners facing foreclosure who are aware of this option. It stands to reason that a bank will seek to avoid foreclosures whenever possible. After all, auctions do not hold as much promise in the current housing market as they used to and in addition the bad loans that are on the books of a bank's balance sheet make them singularly unattractive to potential investors. Of course, the skinny on short sales also demands that the home owner understands that this option is not open to each and every borrower facing foreclosure; instead, there needs to be a demonstrable financial hardship that makes it next to impossible for the borrower to pay the difference between the lowered payoff amount and the actual outstanding balance of the mortgage. If all conditions set forth by the lender are met and the borrower can prove their inability to make good on the loan or at least the difference between the payoff and sale price, the lender is likely to agree to the short sale. Yet even so, there is a significant slowing in the overall sale process and it takes a dedicated buyer or investor with an eye on the property to wait patiently for the approvals. Get answers to your frequently asked questions about short sales. |
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