A Short Sale results when the homeowner sells their property, the net proceeds are insufficient to pay off the mortgage balance, yet the mortgage company agrees to accept less than the mortgage payoff amount in order to close the sale. All Short Sales are subject to mortgage company approval and require an extensive amount of work to reach a successful outcome.
There are no guarantees a Short Sale will be approved or ever close, but when the process has been professionally handled by a REALTOR familiar with short sale transactions, preferably a CDPE (Certified Distressed Property Expert), the odds of success are greatly enhanced.
A short sale is NOT the same as a foreclosure! There are major differences between the two. A foreclosure should be avoided at all costs, as it does serious/long-term damage to a person’s credit. For example, an individual who loses their home to foreclosure can have their credit score lowered from 250 to 300 points and their credit score will be affected for over 3 years. In addition, a person’s security clearance may be revoked and their position may be terminated.
In addition to avoiding possible foreclosure, homeowners who have a successful short sale negotiated on their behalf are forgiven large sums of money; oftentimes without a deficiency judgment or requirement to repay!
Short Sale Complexity
Short sale transactions are highly complex. Real estate agents are expected to follow a myriad of specific guidelines incorporated by the mortgage company, as well as by the investor(s) of the mortgage notes. Each mortgage company is different and has their own rules, which of course adds complication and challenges ones understanding of the process. A particular mortgage note could be owned by several investors in different parts of the world, thus requiring multiple negotiations with respect to what each investor will accept as a loan payoff. When a seller has a second or third mortgage on their house, the level of complexity increases almost exponentially and the likelihood of a successful short sale diminishes. These complex negotiations with the investor(s) and the mortgage companies do not commence until after the real estate agent has negotiated a sale with a buyer for the seller’s house. Following the lender and investor guidelines, then successfully negotiating the short sale with multiple parties and closing the deal can be extremely challenging. The average real estate agent has not been trained in the complexities of a short sale and is the reason they close on such a low percentage of attempted short sales. This is another reason a CDPE is extremely important. Sellers experiencing any type of hardship today (i.e. loss of job, death in family, reduction of income, divorce, separation, illness, transfer, too many bills) may qualify for a short sale of their home, even if they are current on their mortgage payments.
To learn more about short sales, loan modification, avoiding foreclosure and what options and possible solutions exist, please contact The Linda & Ryan Lowe Team