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Short Sales Helping People Avoid Foreclosure

January 9, 2010

If you are one of many people faced with foreclosure, you have probably heard the term “Short Sale”.   A short sale is when a bank or lender allows a motivated seller to sell his or her property for less than the amount owed to the bank or lender.  In other words, you can dump your home for less than you owe the bank, but at what cost?  I talked with Deirdre JP Virvo and Edward Zislis with CT Property Network out of Fairfield County, Connecticut  to get their perspective on how beneficial they thought short sales were to buyers and sellers in this market.

So much information to share…


Short Sale Defined: A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Short sales usually occur when the homeowner is facing foreclosure. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what is owed. (See also: deed in lieu of foreclosure)

Before you decide to short sale your home, remember the following pros and cons:


PROS

  • Saves owner from foreclosure
  • Comes off credit sooner than foreclosure
  • Great price for buyers
  • Seller is motivated
  • Seller may not have to pay mortgage during process

CONS

  • Buyer can walk from the deal due to delayed response time
  • Arms length transaction (family or friends can’t buy)
  • Become more difficult when 2nd liens are present
  • Possible tax liabilities
  • Lower credit score

5 Common Short Sales Mistakes to Avoid

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One Comment leave one →
  1. January 10, 2010 5:41 pm

    Clyde, thanks for bringing attention to the option of Short Sales. What I’m finding is a lot of homeowners don’t realize that there are alternatives to foreclosures and they are just walking away from their homes or in some instances they have a Real Estate Agent list their home for a potential short sale and the agent may not know the full process and all of the documents that the banks are looking for. Since most of the banks are overwhelmed with foreclosures, short sales and modifications they are backed up and behind. If they receive an incomplete short sale package they will close the file. The key is to make sure that first of all there is a true hardship and secondly that you hire an agent that is qualified and knows the process. The short sale can be a very long process (they are working on streamlining) and it can be very frustrating for Buyers and Agents to go through the process for months only to realize that they’ve wasted valuable time because the package wasn’t complete or the agent didn’t know how to structure it and present it to the lender. If done properly the short sale can be a “win win” situation for not only the Seller but the Buyer, Agents, Lender and the community.

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