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About Short Sales
By Scott Roberts, 05 Mar 20:40
What is a Short Sale?
A short sale is the sale of real estate for less than the total debt on the property. In other words, there is no equity in the property. This is also known as being “upside down”.
Short sales typically occur when a property is highly leveraged and the market loses value quickly… like now, especially in California.
A bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor, which is most people that own highly leverage property in SOCAL.
The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.
A short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.
Lenders have a department (typically called a loss mitigation department) which processes potential short sale tra
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