What Is a Short Sale in Real Estate Terms?
In real estate terms, a short sale is when a seller attempts to sell their own for less than what they own on the mortgage because of financial hardship. Discover the lengthy steps involved in a short sale with information from a mortgage specialist in this free video on real estate.
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Hi my name is Stetson Lowe and in this clip we're going to go over short sales. A short sale is where a seller is trying to sell their home for less than what they owe on the mortgage. Typically this would happen in the case of a financial hardship such as a divorce, bankruptcy, loss of a job, something that has financially made it impossible for the borrowers or the homeowners to continue to pay for their mortgage. What you would typically do is call up the loss mitigation department of the bank or the lender and he will have you fill out a financial hardship letter and fax that in to them for their review board or committee to review and see if you get approved for a short sale. Once you are then approved for a short sale you can then list your home with a real estate agent and have them market it as a short sale. A lot of investors are out looking for short sales and looking for homes that are a great deal. As you market the home you will initially have to approve all offers that come in and then you'll send them on for the lender or the bank to review and approve as well. They ultimately have the last say in how much they are willing to take since it is less than what you owe them or what the seller of the home owes on his current mortgage. So it is quite a lengthy process, sometimes offers take three to four maybe even up to six weeks to get reviewed by the lender and decide if they are going to accept the offer or not. It is hard sometimes to keep buyers motivated and continue waiting that long. A lot of times they want to back out and move on to another home so it is good to set the expectations up front and find out from the loss mitigation department how long they are taking currently to review short sale offers and finalize them or accept or counter offer them so that you can properly set the expectations of the buyers for how long it is going to take for that process to take place. Short selling is great way to get out of your home. Another thing to be careful about with the lender is it is kind of on a lender by lender basis. Sometimes they will either 1099 you for the difference of what you owe on the mortgage versus what you sell it for so that you have to pay the taxes on that or they will file for a judgment at the county level or court level where your home resides and slap that judgment on your credit so that you would have to pay it back at some point in order for your credit to ever be fully restored. It does look like a foreclosure on your report so if people tell you that it will save your credit that's not true. Your credit is still going to be, for financing and all intents and purposes it does look like a foreclosure to a lender when you do go through a short sale but it is often times better than completing the full foreclosure process.