Short Sales
What is a real estate short sale? A short sale is the sale of real estate in which the proceeds from the sale fall short of the balanced owed on the loan. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the borrower. This negotiation is done through the banks loss mitigation or workout department. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the bank or mortgage lender sometimes (but not always) in full satisfaction of the debt. The lender has the right to approve or disapprove of the proposed sale. Many short sales leave a deficiency for which the borrower is still liable. A deficiency balance will remain as a potential liability for the borrower.
Extenuating circumstances influence banks decisions about discounting the loan balance. These circumstances are generally related to the current real estate market, like the one we see today and the borrower's financial state. An important thing to know about short sales is that it has to be handled by a real professional who knows how to work these deals. Barker Realty has experienced brokers who an assist you with this process.
Typically a short sale is implemented to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.
A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure.