What is a Short-Sale?

 What is a short sale? 

Simply put, a short sale is a real estate transaction where the property is worth less than the mortgage. In a short-sale, the lender(s) must approve and accept less than they are owed in order to sell the home.

For many homeowners, selling short is not a concern.  Their home is a long-term investment and the value will return over time.  However, an unprecedented number of homeowners have an unexpected hardship and need to sell.

Your lender may approve a short sale if you:
  • Have a hardship. 
  • Have little or no equity in your home
  • Are unable (or soon will be unable) to pay your mortgage on time

Why would a lender agree to a short-sale? 

For one reason: the losses suffered by the lender are typically much less with a short sale than losses suffered after completing the foreclosure process. 

What are the benefits of a short-sale to you?

A short-sale is often a better option for you, the seller, than a foreclosure because it is seen by the lenders as a willingness to help and results in significantly less damage to your credit.  Immediate benefits credit benefits of short-sale versus foreclosure could help with cell phone, insurance, credit card rates and limits.  Future benefits include, in most cases, the ability to obtain a mortgage for a new home (subject to qualification) within 2 years vs. 5 - 7 years for a foreclosure. 

A short-sale takes significantly more work than the typical home sale.

In addition to the expertise required to market your home to buyers, negotiate the contract and successfully track your home sale to closing, a short-sale also requires the ability to submit the transaction to your lender, successfully obtain their approval (often multiple approvals) and track all of the required paperwork through their often frustrating hierarchy (have you reached a live person in the Customer Service department of your mortgage lender lately?).  In short, the Realtor you choose for your short-sale must have a significant amount of expertise and sheer determination to finalize the short-sale on your behalf.