What are the risks involved in short sale listing?

Short sale listings are considered as one of the best methods of getting rid of mortgage debt during a financial crunch. Because of my experience as a short sale agent in Temecula, people often ask me about the potential risks involved in short sales. First of all, let me explain the short sale process in brief. Short sales of real estate involves sale of a house or property that is purchased with a mortgage loan and the same property is pledged as security for the same loan. Generally the short sales process is initiated during times of financial hardships and the home owner sells off the house or property with the consent of the lender. But there are some risks involved in short sales listings and I am going to discuss these risks in detail.

Potential risks in short sales

Every short sale transaction involves some degree of risk and every party involved in a short sale listing is vulnerable to risks. As a short sales expert in Temecula, I would suggest that one should complete the overall process by the book. It will help in reducing the degree of risks involved in the process. If you are planning to go for short sales for your house, I would advise to hire an attorney for any legal help that you may need in the process.

Risk for Lender

It is a very well known fact that short sales are often conducted for a price lesser than the amount borrowed by the owner of the house. Generally the borrower is already indebted with the pending mortgage amount and short sales are often closed at a lesser price than the current market value of the house. It happens quite rarely that the borrower is in capable financial position and can pay the deficit after the short sale is closed. Moreover there are chances of further hardship or even bankruptcy which may lead to more lose.

Risk for Buyer

If the sale is conducted in accordance with the book, then there is only single risk to which the buyer is exposed. There are chances that the original lender may claim a right to ownership or lieu on the house. This can be further regarded as a headache rather than a problem.

Risk for Borrower

When it comes to the risk faced by the borrower during short sale process, the list is a bit lengthy. I have been questioned by many borrowers because of my experience of being a Temecula short sales agent. Some of the risks faced by the borrower are discussed below.

• The first and biggest problem is that the lender may not agree for a short sale and may refuse to provide important documents including consent papers, right to ownership and lien.
• Short sales are complex and it can be really difficult to find a suitable buyer who is ready to pay the asking price for your house. Failure in finding a suitable buyer quickly will pile up the mortgage payments.
• The effects of short will be indicated in your credit report for quite a long time and depending upon your delinquencies, you may lose up to 300 points in your overall credit score.
• In addition to all of these factors, there are chances that the lender may not agree for a short sale and may rather prefer foreclosure proceedings for your house.

As a Temecula short sales agent and experienced realtor, I feel that the biggest loss is the fact that the borrower loses the property in which he has made regular investments. But what I would conclude is that if everything is done by the book, there should not be any problems for all the involved parties.