What is a Short Sale?
"What exactly is a short sale?" That is a question get a lot. A Short Sale may assist a homeowner prior to the foreclosure process. If the proceeds from the sale of a property fall short of the owner's existing mortgage balance, a lender may agree to accept the proceeds on a short sale in lieu of the total obligation due on the mortgage. By accepting a short sale, a lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. In a nutshell you owe more than you can sell the property for, don't have the money to make up the balance and you want the lender to forgive the difference. A short sale transaction is reported on the sellers credit report as "settled for less than the total amount owed".
It's not as simple as just calling your lender and asking for them to approve a short sale. Not all lenders will approve a short sale and every lender has their own process. My suggestion to you would be to hire a Realtor that understands Short Sales to list your home. Your Realtor can then work with your lender to try to negotiate a Short Sale. Your Realtor can help you navigate the process, but you will have to work as a team. You will probably have to provide documents including a hardship letter (what happened), financial information and a letter of authorization for your Realtor to negotiate for you with your lender. All lending institutions handle foreclosures and short sales differently and it also depends on the borrower's financial situation and credit history.
If you are falling behind on your mortgage payments the first thing you should do is contact your lender and let them know what is going on.
Buyers interested in purchasing properties that are "short sales" need to have patience. With a traditional real estate transaction, a buyer makes a written offer and the seller accepts the offer or writes a counter offer. If the seller accepts the offer in writing , then you know usually within 24 hours that you have that house under contract and can proceed to the closing. With a short sale, the process can sometimes be lengthy depending on the lender. I have submitted offers that have taken months to get an answer, and others that have taken less than 24 hours.
If you have questions about real estate, short sales, foreclosure, pre-foreclosure please post on my blog and I would be happy to answer your questions and share with others.
Dee-Dee Burch
I am not a lawyer, accountant or appraiser. A defaulting homeowner should consult the services of an accountant or attorney to protect your best interests.