“Everyone- or at least most everyone- knows what a foreclosure is, at this stage in the game. For many, a foreclosure represents a painful end… while to an equal number, an opportunity. They’ve become an unfortunate pillar of our current economic malaise, the inevitable endgame for homes that carry untenable financial obligations. For some homeowners- and their lenders- there is a pre-foreclosure option: Short Sales.
Short Sales have also become an increasingly popular way for banks and homeowners to avoid foreclosure proceedings by unloading distressed real estate at a discounted, agreed-upon price. Short sales are like The Brady Bunch’s little cousin Oliver: same family, slightly different story. Not as well known- but often times with more potential (looking at the big picture). Popular, but only acceptable in specific scenarios.
Here’s the straight dope on Short Sales:
In real estate, a short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s loss mitigation or workout department. 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, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower’s financial situation.
To find out more about Short Sales, click here.