For some home owners, selling your home is actually the relief that you need. After reviewing your financial portfolio, it may become obvious that you can no longer afford your home. Many owners have often realized this and tried unsuccessfully for months to sell their home through traditional real estate methods.
But, because of market fluctuations and changes beyond your control, sometimes your home may not sell at the anticipated full price of your loan. A 'Short Sale' allows you to sell your home to a third party at a price which is less than the total amount that you owe.
What is a Short Sale?
A 'Short Sale' occurs when a property is sold to avoid a possible Foreclosure auction or bankruptcy. And the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. It is also known as a 'Shorted Sale.' For example, a homeowner who is facing Foreclosure, has an existing first mortgage of $300,000. You write an offer to the lender for $220,000, which is accepted as full payment for the loan. This is a 'Short Sale.'
Why are they willing to take such a discount?
Several reasons. 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. Read more...
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