What is A Short Sale
What is a Short Sale?
A Short Sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property. In a Short Sale, the Bank or Mortgage Lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor.
This negotiation is all done through communication with a Bank's Loss Mitigation Department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt.
In such instances, the lender would have the right to approve or disapprove of a proposed sale. Most Short Sales leave a deficiency balance for which the Mortgagor / Borrower is or still can be liable. In some cases it is not a settlement-in-full. A deficiency balance will remain while the Mortgage Broker, real estate agent / Broker, Loan Officers, Title and Closing Agents still remain in the transaction.
A Short Sale typically is conducted to prevent a home foreclosure. Often a Bank will choose to allow a Short Sale if they believe that it will result in a smaller financial loss than foreclosing.
For the home owner, the advantages include avoidance of having a foreclosure on their credit history and less damage to their credit score. Additionally, a Short Sale is typically faster and less expensive than a foreclosure.
In conclusion, a Short Sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or a sale of a debt, generally on a piece of real estate, short of the full debt amount.
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