Short Sales

By
Real Estate Agent with United Realty Group, Inc.

In real estate, a short sale refers to the sale of a property in which the sale price is insufficient to pay off all encumbrances and pay the expenses of sale. If the lender is convinced that the owner, for various reasons, is unable to continue making the payments the lender will often agree to take less that the full amount owed to allow the sale to close escrow. The incentive for the bank to approve a short sale is to have the property sell before the loan becomes a problem account on their books.

This Process may be difficult to believe but it is a definite possibility. As stated below there are hoops to jump through. Banks are willing to allow individuals to assume the loan if they meet the required criteria. This is a system that works because the banks do not want to hold property for one but they also do not want to pay a fee (at times up to $25,000) in order to send the porperty through the foreclosure process.


Before a lender approves a short sale they will make two key decisions.

First, can the owner afford to continue making the payments on the property? If they can there is no reason for the bank to eat the loss. Banks will not look favorably upon a borrower that they determine lied to get the loan.

Second, will approving the short sale leave the bank in relatively the same position as they are likely to be in by going though the foreclosure process and then selling the property? If the bank can do significantly better by foreclosing they are likely to do so.

The seller must not receive any sale proceeds for themselves.

If there is a junior lienholder, the discounts can be substantial, sometimes as high as 90% or more. Question two is the primary determinant here. If the senior lender forecloses the junior may get nothing so they may take a deep discount to get something out of the property.

Short sale sellers need to be careful because there is no free lunch. The seller may end up with taxable income in the amount of the debt that is forgiven. New laws may stop this and prevent you from this lender act. The seller may also end up with adverse entries in their credit history. Any property owner considering a short sale needs to seek the advice of competent legal and tax advisors before entering into the transaction. 

For more details please call or e-mail Lazaro Gonzalez

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short sales
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Rainmaker
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The Trumm Team Omaha Homes for Sale, Real Estate
Keller Williams Greater Omaha - Omaha, NE

Welcome to ActiveRain!

If you would like a few tips on getting the most out of ActiveRain, please visit my blog Welcome to Active Rain.  It has a few simple steps of what to do now that you have joined.

If you ever have any questions, just let me know.

Troy Trumm

Feb 18, 2008 10:31 AM #1
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Keith Elliott Jr
KEIRE Realty Group - Manassas, VA
Principal Broker/Owner

Hi Lazaro,

Welcome to Active Rain and congrats on your first post! The opportunities to learn and network are incredible here. Best of luck to ya!

-Keith

Feb 18, 2008 12:38 PM #2
Rainer
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Brian Hoots
Real Living Speckman Realty, Inc. - Bourbonnais, IL
Lazaro, great info thanks for sharing.  Welcome to Active Rain.
Feb 18, 2008 01:31 PM #3
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Fred Griffin, on leave of absence from ActiveRain
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in 2017.

  Much has changed since your last blog post.

  Best to you!

Jun 08, 2017 06:33 PM #4
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Lazaro Gonzalez

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