What is a Short-Sale and why should I care?

For starters think of a Short-Sales as an alternative to preventing a foreclosure on your home.

Definition of a Short-Sale:   A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage.  Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments (and is able to prove it). By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. This type of negotiation is done through frequent communication with the bank's Loss Mitigation department.

Why should you care? Well, you wouldn't care unless you are having difficulties making your mortgage payments, or worse, you've already missed a few payments. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing (because it's faster and less expensive than a foreclosure). Another reason you should care is that although a short sale does affect your credit report, the impact is a lot less than a foreclosure, so by avoiding it, you are lessening the impact on your credit. Because a short sale is a type of settlement and it remains on your credit report for up to seven years, it is possible to obtain another mortgage loan 1-3 years after the short sale, generally.  Now that's a HUGE reason to care!  

Do you have to pay commission fees?  No. If a short-sale is approved, the bank will handle and take care of the commission fees wwith the real estate brokerage.   

Mistakes to avoid:  Don't ignore the situation; not doing anything makes matters worse.  Also, consult with an experienced Real Estate professional who specializes in this type of real estate transaction. There's a lot involved in a short sale, typically you're dealing with more than one lender (first and second, etc.), specific processes have to be followed, not to mention the timing of it all (time is of the essence since you're trying to avoid a foreclosure on your home).  It is a fact that short sales have a high failure rate and often do not close on time when not handled by an experienced individual.  Avoid this mistake.

Copyright © 2009 by Chris & Maria Jeantet of www.shastaliving.com - Realtors at Coldwell Banker C&C Properties, 1801 Buenaventura Blvd. Redding CA 96001, (530) 510-8880.