What Is A Short Sale?

A short sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy.

Why are they willing to take such a discount?

For several reasons. First of all, banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.

At the time of this writing, foreclosures are at an all time high. Since foreclosures are increasing, there will be more and more lenders discounting properties. It is safe to say that most lenders will accept a short sale; however, you may come across one or two lenders who will not discount. If the numbers work out for the lender they will do it.

It is best to do a short sale when the property is in the pre-foreclosure state. There are two stages within pre-foreclosure. The first stage being those individuals who are behind on payments and the second stage are those who are behind on payments with a notice of default. It does not matter what type of house or condition it’s in, all mortgages can be discounted. Properties that are over leveraged are also prime candidates. Lenders with a 2nd and 3rd mortgage position would rather have something than nothing.

There are several other major advantages to doing a short sale.

1. We will negotiate a non-deficiency judgment.  Our purchase will be considered “payment in full” and you will not be responsible for any difference in our negotiated payoff and your current loan balance.
2. You can stay in your house while the short sale is negotiated. Short sale negotiations take an average of between 3 to 6 months.
3. You do not have to pay for anything! You will not be charged for us to perform a short sale.

1. There will not be a foreclosure notation on your credit report. A foreclosure will disqualify you from FHA financing for up to 7 years, while a payoff will enable you to obtain FHA financing in as little as 2 years.