What is a Short Sale?
A short sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure or bankruptcy on the property. You are purchasing or selling the property from the lender for a discount. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $700,000. You write an offer or sell the property for $6200,000, which is accepted as full payment for the loan.
Why would lenders take a discount?
First of all, banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.
Please Note: Short sales for sellers in foreclosure are not the answer for everyone and must be considered very cautiously. In some cases lenders may not accept your home in a short sale, or may decide to issue a defiency judgement on your credit profile.
If you or someone you know is facing foreclosure, please contact us for a consultation.