What is a Short Sale?

Today you hear a lot about short sale properties. So just exactly what is a short sale property? A short sale property is when the owner owes more on the mortgage, than the property is worth. These properties are not generally as affected by poor appearance and condition as distressed and foreclosure properties, but are affected by the owner’s financial situation. Short sale properties liked distressed properties may have to be sold in order to pay arrears on a mortgage or the owner may be relocating to another area due to a job change and needs to sell quickly. Because of market conditions, the owner is unable to get any equity out of the property and the alternative to foreclosure is to negotiate with the bank to get them to accept the short sale.

Benefits of a Short Sale

The benefits of a short sale to the owner is that it has a much lesser negative effect on the owner’s credit than a foreclosure. A benefit to all parties especially the lender is that there is no formal foreclosure procedure which saves time and money for everyone. The buyer/investor benefits by purchasing the property at a discount, which is usually at or below market value.

• Avoids the lengthy legal process involved in foreclosure
• Avoids future employers from seeing foreclosure on credit
• Avoids eviction on record that occurs with foreclosure
• Generally less damaging to your credit rating than foreclosure
• Seller potentially eligible for seller incentives for moving expenses

Disadvantages of a Short Sale

The major disadvantage of a short sale to the lender is that they will have to write off the loan balance. However, if the property proceeds to foreclosure, the lender ultimately will have to write the loss off their books anyway. The major disadvantage to the seller and buyer is that the lender may not agree to the short sale and foreclose on the property if the owner does not cure the default. The short sale decision can take as long as three months because there are many individuals and/or departments of the lender’s loss mitigation and the lender’s attorneys that must review the short sale proposal and approve it.

Short Sale Process

At Blue & Gold Realty, we can help you with the short sale process. The first step in the short sale process is for us to contact your lender and make sure the property qualifies for a short sale. If you have already received a notice of default, there is a better chance that the lender will consider the short sale as an alternative to foreclosing upon the property. Our team of experts will write you write your hardship letter and help you put together other documentation needed to submit to your lender. We may be able to successfully negotiate a short sale on your behalf with your lender, allowing you to avoid the foreclosure.