What is a Short Sale?

You've heard the term recently but many people wonder what this actually means. A homeowner is 'short' when:

• A homeowner owes an amount of the property that when combined with closing costs and commissions is higher than current market value.

A short sale occurs when:

• A negotiation is entered into with the homeowners lender(s) to accept less than the full balance of the loan at closing.
• The seller avoids foreclosure and many times they can also avoid a judgment.
• The seller avoids a foreclosure reported on their credit report.

The seller won't get any money at closing but they will avoid the emotional toll a foreclosure can cause.

Why would a lender agree to lost money?

• Financially, it's a smaller loss to accept a short sale vs. expenses of a foreclosure
• Lenders are in the finance business, not the real estate business. The more resources they have tied up on a property, the less they have to lend out.

How does a short sale help me?

• It can help save your credit. Typically a foreclosure will drop your credit score significantly and stays on your credit report for 7-10 years. This will affect your future purchasing power and interest rates.
• It helps avoid an overwhelming and emotionally draining foreclosure process
• It could help you avoid a 'deficiency judgment' from the lender after foreclosure as they try to recover their losses.

How do I pay the REALTOR commissions, taxes and closing costs associated with a home sale?

• These expenses are paid by the lender as part of the short sale. The homeowner does not pay any of the expenses involved with the sale of the home.