What is a Short Sale?

There is a lot of talk in the media these days regarding Foreclosures and Short Sales. To understand a Short Sale, first you need a little background on what is a Foreclosure. If you dig out your Deed of Trust from the stack of Closing Documents that you received when you first bought the house, you'll find a section that explains the right of the trustee to sell the premise if the borrower defaults on in the payment of the debt.

A house was purchased with money borrowed from a lender or bank. The party buying the house agrees to pay the loan. If the payments are not made on the loan, the lender has the right to recoup there interest in the property by initiating a foreclosure. To summarize, if the homeowner doesn't pay the mortgage, the bank has the right to repossess the property.

When a homeowner is informed that the foreclosure proceeding is being initiated the homeowner has a a few of choices. Doing nothing, which is a choice, will result in eventually losing the property and (if the former owner hasn't left) eviction. This choice will have one of the highest impacts on your credit rating.

Another choice, which we always advise the homeowner to do is contact the bank and see if they'll work with you on any type of loan modification.

If the homeowner is unsuccessful with their conversation with the bank, then a Short Sale may be a possibility. In very simple terms a Short Sale is the name of the process where a lender agrees to accept a payoff amount for less than the balance on the homeowner's loan. Accepting an amount less than what is owed causes the loan to come up “short”, hence the name: Short Sale.

In the next installments, we'll be discussing “What is the Short Sale Process”, “How do you qualify for a Short Sale”,  and  “Why would a lender be willing to accept a Short Sale?” If you can't wait we have more Short Sale Information here, or you may contact us directly if you have an urgent issue that you need resolved immediately.