What is a Short Sale ?

April 11, 2008

short-sale-image.jpgThere are a variety of Real Estate terms like, HUD, REO, Dual Agency, SPDS (seller disclosure), Pre-Foreclusure and countless others, .

Short Sale seems to be the phrase du jour …. And I am always asked,

What does a ‘ Short Sale ‘ in Real Estate mean ??

Simply put, a real estate Short Sale means the lender is accepting a lesser amount as a payoff than the total amount of the loan due.

Why??? ….Well, a seller has an opportunity to sell the house, possibly salvage credit (seller still cannot have late payments) , and potentially avoid bankruptcy, ….

And, the lender, removes the mortgage from their portfolio, writes off the loss, and avoids a trustee sale for a lesser amount or possibly does not have to take ownership in their REO (Real Estate Bank Owned) inventory (is not, though for many is fast becoming a business model)

Here’s what is typically required for either sellers or buyers who hope to get their Short Sale offer accepted. (a streamlined list & explanation) for your Short Sale process

  • Call the lender and speak with someone in the short sale (or appropriate) department
  • They will generally want a written request with your personal information·
  • Estimated Net proceed sheet - estimated sale price minus estimated selling fees (escrow officer can help) if Short Sale offer gets accepted
  • A Hardship letter with supporting financials (Bank Statements, tax returns, paystubs, etc..)·
  • Listing Agreement / Purchase Agreement Not all lenders will accept short sales / discounted payoffs.

In fact, many of the short sales that are listed on local MLS systems as ‘Short Sales’ have not been approved. I hear stories often of buyers who have put in full-price cash offers on supposed short-sales that are not accepted by the lender as they have not been approved.

Finally, there are some (typically negative) tax consequences to selling in a ‘Short-Sale’, so consult your CPA or tax expert before you take the step to sell short.

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Copyright © 2008 By James Wexler, All Rights Reserved. *What is a Short Sale ?*

Contact James Wexler (480) 221-8080 for all your Phoenix Scottsdale area Real Estate needs.

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Written by James Wexler · Filed Under Articles, Buyers, Investing, Lending / mortgages, Short-sales / Foreclosures 

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