A short sale is the process by which homeowners can sell their home for less money than they actually owe on the mortgage(s). This is accomplished by providing proper documentation to the lender(s) to convince them to reduce the mortgage balance to allow the sale. If the sale is approved, the mortgage lender(s) will actually take a loss on the mortgage.

If a bank approves the discount of a mortgage, the home can be sold for a price lower than the amount owed without the seller having to come up with cash to cover the shortfall. The mortgage is satisfied and any foreclosure process stops.

Every bank has a specific method of deciding how much they’ll accept on a short sale.

Most short sales are accomplished on properties heading toward foreclosure. This means the homeowner is at least 3 payments behind, and the foreclosure process has already begun. Recently however, more mortgages that are simply behind or “in default” are considered short sale candidates without actually being in foreclosure.

Next, the homeowner typically has no equity or negative equity in the home. In other words, the total balance owed to the lender is equal to, or greater than, the price at which the house can be sold.

Lastly, the homeowner must have some type of financial “hardship” which is preventing him from paying the mortgage.

First and foremost, a short sale relieves the stress of being in foreclosure and it allows the homeowner to get rid of their big mortgage payment and move on with their lives. A short sale allows you to stop a foreclosure proceeding and get a fresh start. In our experience, this is the primary benefit to the homeowner.

On the credit side, a short sale is arguably the lessor of two evils. Having some late payments, and a foreclosure filed has already done damage to your credit.. However, a completed foreclosure generally does more damage than a short sale agreed to by a lender. Obviously, a bankruptcy significantly damages your credit score.

Yes, but remember the “hardship” element which must be present. For investors there may also be some income tax issues resulting from mortgage relief. Remember to consult your tax advisor..

Possibly. In some instances there is a potential risk of a deficiency judgement or a lawsuit on a loan contract, as opposed to judicial foreclosure. Give me a call and we can discuss the specifics of your situation.

Each situation is different and must be evaluated individually. The important factors in relation to a short sale are:

a. Property in foreclosure or default

b. Personal financial hardship

c. Little or no equity in the property

d. At least 60 days until eviction date

e. The value of the home has declined below the loan amount

If you feel you fit into these criteria, give me a call and we can discuss your specific situation.

Short sales can still generally be accomplished on all of these types of mortgages, though each one has different criteria.