The Short Sale

For some home owners, selling your home is actually the relief that you need. After reviewing your financial portfolio, it may become obvious that you can no longer afford your home. Many owners have often realized this and tried unsuccessfully for months to sell their home through traditional real estate methods.

But, because of market fluctuations and changes beyond your control, sometimes your home may not sell at the anticipated full price of your loan. A 'Short Sale' allows you to sell your home to a third party at a price which is less than the total amount that you owe.

What is a Short Sale?
A 'Short Sale' occurs when a property is sold to avoid a possible Foreclosure auction or bankruptcy. And the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. It is also known as a 'Shorted Sale.' For example, a homeowner who is facing Foreclosure, has an existing first mortgage of $300,000. You write an offer to the lender for $220,000, which is accepted as full payment for the loan. This is a 'Short Sale.'

Why are they willing to take such a discount?
Several reasons. First of all, banks do not like excess inventory and bad loans on their books. Therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.

Your lender will use the proceeds from the sale to pay off the mortgage and the remaining balance will be negotiated or perhaps even forgiven. This avenue is open for homeowners who are willing to part with their property but keep their credit rating with the least amount of negative reports.

Negotiating a 'Short Sale' with the lender is a difficult, lengthy process. Generally because it is very hard to find the bank officer who has the authority to accept a discount. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the hard work and the negotiating can begin.

The Mortgage Company may require a written contract with you and the buyer, a HUD-1 or Settlement Statement of the sale, a buyer assurance letter stating that the potential buyer is approved for the new loan, proof that the house has been on the market for 90 days with a Real Estate Agent and financial information from you showing that you can’t afford the house.

However, be aware that many 'Short Sales' fall through for a variety of reasons.

MORE WORDS TO LIVE BY

During these times of trials, tribulations, persecutions and testing we must comfort ourselves and one another with the Word of God!

“The steps of a good man are ordered by the LORD,
And He delights in his way.
Though he fall, he shall not be utterly cast down;
For the LORD upholds him with His hand.
I have been young, and now am old;
Yet I have not seen the righteous forsaken,
Nor his descendants begging bread.
He is ever merciful, and lends;
And his descendants are blessed.”
Psalm 37:23-26

And the words of Jesus:

“... Assuredly, I say to you, there is no one who has left house or brothers or sisters or father or mother or wife or children or lands, for My sake and the gospel’s, who shall not receive a hundredfold now in this time—houses and brothers and sisters and mothers and children and lands, with persecutions—and in the age to come, eternal life. But many who are first will be last, and the last first.” Mark 10:29-31