What is a Short Sale?

In real estate, a short sale is when a bank or lender agrees to accept a sale of a property for less than the amount owed to the bank or lender.  In other words, the home owner/borrower sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.  In almost all short sales, your lender must approve of the proposed sale.

Extenuating circumstances influence whether or not your lender or bank will accept a short sale. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.  Lenders’ criteria generally dictate that in order for the bank to accept a short sale, the borrower must demonstrate some sort of financial hardship.  In order to help sellers demonstrate their financial hardship, &Opportunities works closely with The Schwartz Law Firm in order to assure sellers that their legal interests are protected.  There are many moving pieces in a short sale and sellers should know their legal rights before they elect to sell, and also throughout the process.

Generally, short sales allow lenders to avoid the larger losses associated with foreclosures.  For example, foreclosure prices are usually below market and banks incur the costs of home ownership once they foreclose on a home, which include home owner association fees, real estate taxes and insurance.  Therefore, lenders have financial incentives to accept short sales as one means to minimize their losses.  For sellers, the advantages include avoiding the credit harm associated with a foreclosure, limiting the losses and often avoiding deficiencies.  Finally, a short sale is typically faster and less expensive for lenders than foreclosure.

All sellers should understand that banks and lenders have several departments that participate in the short sale process, including short sale, loss mitigation, foreclosure, loan modification and customer service departments, all of which may processes some or all of any short sale transaction.  Therefore, you should be cautious in pursuing a short sale and make certain you use experienced professionals who know how to navigate and manage the process before electing to pursue a short sale of your home.

Sellers should know that big bank bureaucracy and “red tape” is very common in short sales, which can make the process slow, frustrating and possibly, require several levels of approval and conditions from your lender(s).  Junior liens, such as second mortgages, HELOC lenders, and HOA (special assessment liens), will also need to participate in the short sale approval process. It is possible for junior lien holders to prevent a short sale.  Therefore, &Opportunities works with The Schwartz Law Firm and various title companies to determine whether your sale has challenges right from the start of the process so we are proactive and not reacting to problems as they arise.