What is a SHORT SALE?

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What Is A Short Sale?

In legal speak, a short sale is a LOSS MITIGATION SOLUTION.  What this fancy word means is that they bank is cutting it's losses!

The home is a short sale candidate when the value of the mortgage is greater than the value of the property.

A SHORT SALE is a home SOLD by the OWNER before foreclosure takes place and the lender agrees to accept less payment than what is actually OWED to them.  

How does this help anyone?  

1. This helps the bank because they are able to get back their money...generally, the only way a SHORT SALE is approved is if the bank can get somewhere between FORECLOSURE VALUE and NOTE VALUE when they approve the sale, meaning that they don't get all their money back, but they get more than if they foreclosed and sold it. 

2. The homeowner is able to be involved in the process and can help craft their own solution to the financial problem they have found themselves in.  They have the ability to take matters in their own hands and avoid the foreclosure.

What is the difference between Foreclosure, SHORT SALE and Pre-Foreclosure? 

A foreclosure is when the bank has taken possession of the collateral in the mortgage (the home); A short sale is when the owner sells the home and the bank agrees to take less than owed to release their collateral;  a PRE-FORECLOSURE is when the bank officially sends a notice of default to the homeowner that they are taking legal action against the homeowner.

What can you expect to need if you want to sell your home through SHORT SALE? 

You will have to give an authorization for your agent to discuss your mortgage with your bank, you will need a sales contract, you will need 2 months of bank statements, a hardship letter to the lender, repair estimates, comparable values for sales in your area, photos of the home, your household budget which shows why you can not keep up with your mortgage, 2 years of tax returns and other items as required by each individual bank. 

Comments (2)

Linda Edelwich
William Raveis Real Estate - Glastonbury, CT
Glastonbury Office's #1 Top Producing Agent-not on

Great explanation. I get asked this all the time.

Sep 02, 2011 04:05 AM
Goran Utvic
606 Homes LLC | Chicagoland Brokers Inc, Chicago IL 60656 - Chicago, IL
We Buy & Sell Chicago Houses Fast

Ron...great post! more and more homeowners are realizing that a short sale is the best option in avoiding foreclosure.

Sep 09, 2011 01:49 AM