WHAT IS A SHORT SALE?
A “short sale” is an option for a homeowner to avoid foreclosure when they can no longer afford the mortgage payment on the home. In a short sale, the lender allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. The lender agrees to pay the seller’s commissions, closing costs, and reasonable attorney and title fees charged in most real estate short sale transactions. The terms of the short sale approval are as much a part of the negotiations as is the buyer’s offer. In most cases, the lender allows the property to be sold at fair market value and releases the seller from any future financial obligation to the lender’s loss.
In order for a lender to agree to a short sale, they usually require the homeowner to list their property for sale at fair market value, provide financial information to the lender to confirm hardship, and only accept an offer from a buyer that is “arm’s length” in the transaction. In most cases, it is in the best financial interests of the lender to approve a fair short sale offer than foreclose on the property.
Short sales can be very technical and complex transactions involving careful coordination and close cooperation among a number of parties – lenders, sellers, buyers, attorneys, real estate brokers, title agencies, and often mortgage insurance companies and junior lien holders. When foreclosure is the alternative, a short sale usually provides a better outcome for the seller, lender, and the community in which the property is located.