Short Sale, What is it?

A real estate short sale is an alternative to foreclosure and is an option for homeowners having difficulty paying their monthly mortgage payments. In such a situation, the homeowner asks the lender to allow the homeowner to sell their home; the lender agrees to accept an amount for the home, which is lesser than the payoff amount due.

Lenders usually agree to accept a short sale, to avoid the cost and time associated with a foreclosure. In a foreclosure, lenders lose about forty percent of the mortgage amount in attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Furthermore, it can take up to two years to bring about a foreclosure. Lenders who want to save themselves from such situations opt for a short sale.

Those who are considering a short sale should contact the lender. In fact, they should contact the lender as soon as they are behind or even before they are behind on payments. Most, if not all lenders have a department that takes care of borrowers who are behind in payments and these are the people to contact for a short sale option. The borrower will usually need to submit information such as copies of their W-2s and paycheck stubs, bank statements to show proof of assets and a letter detailing as to why they are unable to make payments due to which they need a short sale.

When a homeowner is unable to pay off the mortgage obligations, the usual options they have are a foreclosure or declaring bankruptcy. Both of these options are difficult on the homeowner and destroy the homeowner’s credit. Taking the route of having a short sale is a better option as it is not as detrimental to a person’s credit and the homeowner has more control over when they leave (yes, it does hurt a borrower’s credit score). The only issue here is that not all lenders agree to accept short sales and not all properties are eligible for a short sale.

In some cases, the borrower may be responsible for taxes associated with the amount “forgave” by the bank on their loan.

Those who are considering buying a real estate short sale should contact an experienced short sale real estate agent to learn about the process and options.