The Short Sale Process Explained
 

By definition a short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower has a *documentable hardship* and cannot pay the mortgage loan on their property. The lender may decide that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. The short-sale agreement/approval will govern the bank's rights to go after the homeowner. They have a 90 day window to pursue a deficiency after a bona fide sale otherwise. 

The Process  

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is "doing the other a favor;" a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than would result from foreclosure or continued non-payment. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer. 

Credit Implications  

Short sales are a type of settlement, and they adversely affect a person's credit report. The negative impact may be less than a foreclosure, but in some cases the effect is the same. Unlike bankruptcy line items, short sales DO show on a credit report like Experian, Trans Union, or Equifax and remain on your credit report for 7-10 years. Some people may have some credit available to them within 18 months or so. Depending upon other credit information, it is possible to obtain another mortgage 1–7 years after a short sale. While lenders sometimes forgive the remaining loan balance, other lien-holders likely will not. Further, it is possible for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior. 

Bank Recognized Hardships  

·Unemployment
·Reduced income (laid-off, new job, partner's loss of job, pay cut)
·Illness or medical emergency
·Job transfer (voluntary or involuntary)
·Divorce, separation or marital difficulties
·Exotic mortgage terms (an adjustable-rate loan)
·Military service
·Death in the family
·Incarceration
·Increased expenses and excessive debt
·Unexpected repairs or home maintenance 

Approval Timeline  

Short sale success rates vary from state to state and from bank to bank. Some short sales in New York can close in 3 months and others can take a year or more.  

Short sales can be confusing and sometimes complicated. It is recommended that the homeowner seek the advice of an attorney who specializes in real estate law for legal advice .

I have extensive experience in short sales. On the welcome page is a link to Short Sale Listings. Click on the button, and see these homes that were successfully negotiated.If you are or someone you know are finding themselves upside down on their home and need confidential advice on what to do first, please feel free to contact me. There is no obligation.