What’s a short sale? When it comes to real estate, a short sale means selling real estate for less than the balanced owed on the property’s loan. A short sale often occurs when a borrower simply cannot pay or keep up with the monthly loan balance, and the property is at risk of going through the foreclosure process. Especially in these hard economic times when banks are having a lot of properties back on their books, a short sale can be an option for the borrower, and to avoid taking on another property in their inventory.
In the case of a short sale, both parties agree to the reduced sale amount. The lender takes less than what is owed in order to turn the property over to another buyer. And the borrower agrees to avoid the foreclosure process by turning over all proceeds to the lender, and in many cases remain obligated to pay the remaining balance of the loan over time.
It’s important to note that not all lenders give the option of short selling, and not all properties are available for short selling. The only way to learn your options is to call or sit down with your lender, and discuss the best path for your situation.
If you feel a short sale might be an option, go in with an open mind. Lenders will do their research ahead of time, and know the value of your home based on current market conditions. The value of a home or property is not based on the amount of the mortgage; its based on other comparable properties within the surrounding area.
Also, you don’t have a long process or wait for default in order to qualify for a short sale. In some circumstances, a short sale may be approved based on the seller’s hardship, and the overall value of the home. A seller may be struggling month after month, knowing his house isn’t worth the true mortgage value they are paying on.
As a seller, one of the best reasons a short sale may be your answer is to avoid foreclosure. Foreclosure will destroy your credit ratings for the next seven years, and will make it harder for you to get credit for big ticket items in the future. If you are still current on your loan, and using a short sale to get out of a high priced home, under Fannie Mae guidelines you may be available to purchase another home – something in the price range and location better suited for your needs.
