Short Sale Basics      

What is a real estate "short sale"?

Briefly defined, a short sale occurs when a lender agrees to accept less than the full balance of the mortgage as full repayment of the loan when the property is sold.  

What are the conditions of a short sale? 

To be considered for a short sale, a homeowner and his or her property must meet certain conditions:

  1. The market value of the property is lower than the balance of the mortgage plus closing costs;
  2. The homeowner can demonstrate a financial hardship; and
  3. The homeowner is insolvent - there is no financial ability to cover the shortfall.
What are the potential benefits of a short sale?

Short sales can be a winning proposition for all parties involved:
  • The cost of foreclosure can be far greater to a lender than accepting a reduced loan balance;
  • For homeowners, the credit damage and emotional cost of foreclosure can be significantly lessened by a short sale;
  • Qualified buyers who have the flexibility and patience to see a short sale through to completion can get a great deal.  Short sales are the true bargains in today's market for the right buyer.  
What are the risks and drawbacks of a short sale?

Short sales are difficult waters to navigate.  There are many issues of which sellers and buyers should be aware, including:
  • Short sales can take many weeks to be approved and close, and buyers may lose patience and walk away;
  • Although we try to pre-qualify a property and seller as much as possible, a short sale may ultimately not be approved for circumstances that are out of anybody's control;
  • There may be financial consequences to the seller (although currently the government is working to reduce these);
  • Properties are sold as-is and the seller is generally unable to make repairs;
  • Lenders will rarely accept sale contingencies other than financing and inspections.
What is NOT a short sale?

Unfortunately, a short sale is not a "Get Out of Your Mortgage Free" card for sellers who are upside down on their loan.  Unless a homeowner is in or headed for foreclosure, can prove a hardship and cannot afford to cover the shortfall, waiting out the market or bringing cash to closing is the only option.
 
I think I qualify. So how do I get started with a short sale?

First and foremost, get qualified help!  Whether buying or selling, find an agent who is experienced and/or certified in the process of short sales.  Check out more info:

Short Sale Info for Sellers
Short Sale Info for Buyers