What Is a Short Sale?

4 min read

What is a short sale?

A short sale is a sale of real estate in which the proceeds from selling the property fall short of the balance of debts secured by liens against it, and the property owner cannot afford to repay the liens in full. The lien holders agree to release their lien on the property and accept less than the amount owed on the debt. Any unpaid balance still owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligation to repay any shortfall on the loans unless that is specifically agreed to between the parties.

Why would my lender approve a short sale?

It costs a lender a great deal of money to complete the entire foreclosure process, and it could lose more by foreclosing than by agreeing to a short sale. When deciding whether to approve a short sale, the lender weighs the potential of making or losing money in both the foreclosure and the short sale scenarios.

The foreclosure process carries significant costs, plus the expense of owning the home while waiting for a buyer. The lender has to account for the cost of owning a property, including attorney fees, utilities, maintenance and repairs, property insurance, and other holding costs.

Add those costs to the interest already lost on the mortgage, and the lender may be looking at a loss that adds up to tens of thousands of dollars. The costs keep climbing if the lender is unable to find a buyer quickly.

Is a short sale the best option for me?

If you have negative equity in your home, are behind on your payments, or may be unable to continue making them, a short sale may work for you. If you cannot sell your home for the amount you still owe on the balance of your loan, a short sale is one option to get your home sold.

A short sale is one potential way to avoid foreclosure. Other options include loan modification and bankruptcy, among others. Because we are not attorneys, we do not advise which option you should pursue, but we can refer you to excellent local attorneys if needed. We can also help you if you choose to short sale your home.

A short sale allows you to avoid foreclosure and the hopelessness and anxiety that can come with it.

Some of the benefits include:

• Avoiding foreclosure and the social stigma associated with it.
• Avoiding a foreclosure or bankruptcy on your credit report.
• Potentially being eligible to buy another home much sooner than after a foreclosure.
• A fresh start.