Short Sales

With the many changes in the market, we wanted to help to educate our clients and answer some frequently asked questions about short sales. If anyone you know has any questions about short sales, please contact us, as we have relationships with CPA’s and Attorneys who have the latest information. Since each transaction is unique, it is imperative that any person in this situation gather the best advice prior to moving ahead.

What is a short sale?

A short sale is when a lender accepts a discount on a mortgage to pay-off the loan to avoid a possible foreclosure auction or bankruptcy. The lender must approve the contract and terms of the discounted pay-off. Foe example: A homeowner facing foreclosure has an existing first mortgage of $700,000. A buyer writes an offer for $580,000, which is accepted by the lender as full payment for the loan.

What happens to the seller’s credit rating after a short sale?

What typically happens is that the loan will show as “paid” on their credit report, with a notation that says “settled for less than the original owed”, or something similar. It is more favorable for a homeowner to short sell their home than to have a foreclosure on their credit report.

Can an owner profit from a short sale?

The seller cannot profit, monetarily, from a pre-foreclosure short sale.

How do bankruptcies affect the possibility of a short sale?

Most mortgagors will not consider a short sale if the homeowner is in bankruptcy. This is because negotiating a short sale pay-off is considered collection activity, and collection activities are prohibited in bankruptcies.

How late in the foreclosure process can you start a short sale?

Try to allow a window of at least 90 days to effectuate a mortgage approved pre-foreclosure short sale.

For all other questions, leave us a note, or e-mail me at cindy.engel@comcast.net

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