What is a Short Sale?

A Short Sale occurs when the homeowner owes more on their mortgage than the property is worth in the current market.

This can occur when the homeowner originally took out an Interest-Only loan with negative amortization and pay-off penalty fees. As a consequence, the homeowner now owes more than the home is worth and would have to pay the difference in order to sell the property.

Short Sales are often one of the first steps in the Foreclosure process. However, the Short Sale is a better option for the homeowner because of the impact a Foreclosure has on the homeowner's credit rating.

The Short Sale process must be agreed to by the mortgage holder (lender). The Lender will require the homeowner to provide paperwork -- in the form of W-2 forms, pay stubs, and tax returns -- documenting their inability to make the mortgage payments.

Naturally, Lenders prefer a Short Sale rather than a Foreclosure, so they are often willing, in some degree, to forgive part of the loan amount.

Short Sale Summary

• The seller must disclose the fact that the home is a Short Sale.
• The short sale MUST be approved by the lender, who will require extensive documentation about the seller's inability to pay off the existing mortgage.
• Even if a seller accepts an offer, it is subject to approval by the lender.
• The lender will send an appraiser to evaluate the property's market value.
• The lender must receive a hardship letter and other required documents from the seller in order to approve a short sale.
• The lender will likely request that the sale be "as is" and will most likely not approve any money for repairs
• The short sale will take more time -- as long as 60-90 days or longer -- to complete.

Short sales are listed in the local MLS. Visit my broker website to begin a search. While you're there, register to have property listings automatically emailed to you.