What is a Short Sale?
The term short sale is describing a situation where a property owner owes more on their home than it’s current market value and is “short” the funds to pay the remaining balance owed on the loan. Sadly, it does not mean that the process will be short, in fact it can mean quite the opposite.
You might wonder… if the sellers can’t pay off their mortgage how can they sell? Lenders today know that the alternative to a short sale is often a foreclosure, and they do not want to foreclose, so they will work with sellers who are “under water” so they can sell.
Sellers aren’t necessarily off the hook, in some cases they may be asked to contribute cash or sign a promissory note to pay back some or all of the funds still owed. However, in cases where there is a true hardship, banks very often do forgive all of the remaining balance of the loan. In a few cases, banks even provide a cash incentive to sellers who completed a short sale rather than forcing the bank to foreclose.
This is truly a win for the sellers. Sure, their credit takes a hit. But, their bank accounts and immediate financial future is far better off than if they were to go through a foreclosure. And, it is expected that most of these sellers will be eligible for purchasing again in the not so distant future. In fact, some of my “short sale” sellers from a few years ago have already purchased a new home.
Do you need to sell and owe more than your home is worth? We should talk.
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