Selling Through A Short Sale
A short sale is when a bank or mortgage lender agrees to discount a loan balance due to
an economic or financial hardship on the part of the borrower. This negotiation is all done through communication with the servicer or lender’s loss mitigation department. In the process, you will sell your property for less than the outstanding balance of the loan, and turn over the proceeds of the sale to the lender in full satisfaction of your debt.
The lender has the right to approve or disapprove of a proposed sale. There are a lot of circumstances that will influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and your specific financial situation.
A short sale is typically sought after in order to prevent a home foreclosure. Often, a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing on the property. For the homeowner, the advantages include not having a foreclosure on their credit history, and partial control of the monetary deficiency. Additionally, a short sale is typically faster and less expensive than a foreclosure. After all, a short sale is nothing more than negotiating with lien holders about a payoff for less than what they are owed. In simple terms, it is a sale of a debt, generally on a piece of real estate.
There are certain conditions that must be satisfied in order to qualify for a short sale that include:
1. The property must be owner-occupied
2. The mortgage may need to be 31 days delinquent or more at the time of the pre-foreclosure sale closing
3. The mortgagor must provide documentation of a reduction in income or an increase in living expenses
4. Documentation that verifies that the mortgagors need to vacate the property