What exactly is a Short Sale?
To keep it very simple, a short sale is a partnership of sorts between a mortgage lender and property owner/borrower to sell the house and pay off most of the loan when the amount due is higher than the home’s value.
If an owner/borrower must sell and doesn’t have the financial ability to pay the negative difference between the loan balance and sales price, lenders might agree to take a loss rather than go through the long and costly process of foreclosure. REO (real estate owned) properties can sit vacant for months before they are publicly offered for sale, still require maintenance, insurance and management, and often sell for substantially less than the short sale might have brought.
If an owner/borrower anticipates being in this position, immediately contacting the lender is urgently important. Banks are often willing to cooperate with their borrowers if a short sale appears to be a better option than full foreclosure.
Beware that other recorded lien holders (property tax, HOA’s, junior mortgages, equity lines of credit, etc.) also must agree to the short sale price or they can block the sale and force a foreclosure. And depending on negotiations with lenders and creditors, the deficiencies (shortfalls between the amounts paid and the total amount due) might still be an obligation to the owner/borrower.
One final caveat – a short sale is still a voluntary foreclosure and can show up as such on credit reports for as long as seven years.
Obviously short sales are complicated. For specifics, contact your lender. For general or informational assistance, contact me or one of Neuse Realty’s experienced agents.
A source of easy to understand information is contained here: Short sales
To keep it very simple, a short sale is a partnership of sorts between a mortgage lender and property owner/borrower to sell the house and pay off most of the loan when the amount due is higher than the home’s value.
If an owner/borrower must sell and doesn’t have the financial ability to pay the negative difference between the loan balance and sales price, lenders might agree to take a loss rather than go through the long and costly process of foreclosure. REO (real estate owned) properties can sit vacant for months before they are publicly offered for sale, still require maintenance, insurance and management, and often sell for substantially less than the short sale might have brought.
If an owner/borrower anticipates being in this position, immediately contacting the lender is urgently important. Banks are often willing to cooperate with their borrowers if a short sale appears to be a better option than full foreclosure.
Beware that other recorded lien holders (property tax, HOA’s, junior mortgages, equity lines of credit, etc.) also must agree to the short sale price or they can block the sale and force a foreclosure. And depending on negotiations with lenders and creditors, the deficiencies (shortfalls between the amounts paid and the total amount due) might still be an obligation to the owner/borrower.
One final caveat – a short sale is still a voluntary foreclosure and can show up as such on credit reports for as long as seven years.
Obviously short sales are complicated. For specifics, contact your lender. For general or informational assistance, contact me or one of Neuse Realty’s experienced agents.
A source of easy to understand information is contained here: Short sales
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