Browsing Category Short Sale Questions

Gen Wright asked:


nancial hard ships, a mortgagor may have his or her own home foreclosed by the lender. That means losing the home, and a certain sum of money. When a mortgagor fails to keep up with the mortgage payments, he starts to owe the lender more and more money. And as the interest compounds, the mortgagor soon finds himself in a downward spiral situation. The longer he delays the payments, the more money he owes, and therefore loses. The only way to avoid this scenario, is to seek professional help as soon as possible. There are several options for the mortgagor to choose from in the face of a possible foreclosure. So it is definitely possible to minimize the losses while the damage is still manageable. For sure, it would be a pity if a mortgagor fails to tackle the problem early and loses his home and a huge amount of money just because he is unaware that help is readily available.

It is beyond the scope of a single article to discuss all the possible solutions to solving a foreclosure problem. So let’s focus on the short sale option in this article. First thing first, what exactly is a short sale?

A short sale means both the mortgagor and the lender agrees to sell off the property at a price to offset the outstanding loan balance. The loan balance is usually discounted. The lender, however, in such a circumstance, will have the final sale as whether a sale is approved or not. Once the short sale is complete, the discounted loan is considered settled, and the mortgagor no longer owes the bank any more money, thus saving himself from having to potentially repay a huge amount of interest owed.

You would probably have observed that the goal of the short sale is to minimize loses and prevent further damage being done to the mortgagor’s already suffering financial situation.

For example, a mortgagor may have lost his job during a recession. And because of the recession, he is unable to land himself a new job any time soon. So he finds himself unable to meet the mortgage payments. Now he wants to consider selling away his property, since he cannot keep up with the payments. But he finds that the market value of his house has gone southward, again due to the bad market conditions. He realizes that no matter what he does, he is still losing money. If he doesn’t pay up soon, his home will be foreclosed by the lender. And before his home is foreclosed, he would have owed the lender several months of mortgage payments, on which is accruing interest as long as he doesn’t pay up. So to stop the situation from getting from bad to worse, he may have to consider negotiating a short sale with the lender. This will help sell the house faster, as the mortgagor can now sell it at a lower price to offset the discounted loan amount.

Do consider engaging the help of professionals to help negotiate a short sale, as they may be able to sell the property for a discount. In addition they may be able to assist in finding a new home. Do not go through a foreclosure and ruin your credit get professional short sale help now.

Anne Eliason asked:


It can be very hard for owners to accept when the market forces them to sell for less than they want to get out of their home. Lately, some sales are even for less than the owners still owe on their home. This is never easy. Known as a short sale, it is an alternative to foreclosure for down-on-their luck home owners. But they aren’t a simple process, requiring the lenders approval at every stage. If an offer is made, the bank needs to decide if it is within the range they will accept. If they do accept it, the owners need to find out for sure if their remaining debt will be absolved. Some lenders will do this but others may force the seller to pay their remaining debt by selling off their other assets.

The chance of being absolved of debt is very appealing to down-on-their-luck home-owners, considering the alternative is to foreclose. Foreclosures mark ones credit rating for seven years. Sadly, a bad credit rating can stop one from getting another mortgage. Further, some renters and even employers check credit ratings and see them as a sign of trustworthiness and competence. Plus, there’s the humiliating process of having one’s home on the public auction block. So the impacts of foreclosure are far reaching and can really turn ones life in a negative direction. It should be noted, however, that although a short sale shows up differently on your credit report, it is still there, and can also have a negative impact.

Most banks prefer to accept a short sale than to foreclose, as they must pay taxes on every property in their possession. Taking a small cut in the sale of the home may still save them the money and hassle involved in foreclosing. So short sales are a better option, but they can end up taking months longer than conventional home sales.

A short sale is a serious thing, and won’t be accepted by the lender without proof that the market drop has created a situation wherein the homeowner will absolutely not be able to sell the home for what they owe. Also, a short sale usually can’t happen until after the homeowner is in default, or is about to go into default. In the past, no bank would consider it until the owner had missed mortgage payments. However the current economic climate has made lenders realize that it’s sometimes better to quit while they’re ahead, so to speak, and accept a short sale before they loose too many payments. However, the homeowner will probably be expected to show, in writing, why they are unable to make further payments or pay the remainder of their debt. Suitable reasons include a death or critical illness in the family, divorce, loss of a job or bankruptcy. Homeowners will also need to show the lender that they have little or no assets. Ultimately, it is in the lenders hands whether or not a short sale is accepted.