A Short Sale may be an option for any Real Estate owner that has a need to sell when the property value or total cost of sale is lower then the payoff of all the liens on the property. Industry terms for this is "upside-down" or "under-water".
When a property owner comes to the realization that a short sale is the best option for them they need lender approval in order to satisfy payoff of the note in order to transfer title free and clear. This negotiation is all done through communication with a bank's loss mitigation or workout department.
The lender will always try to play hardball in order lessen their loss as much as possible. In order to get the lender to agree to any short sale the property owner needs to prove that not only is the property work less then what is owed but also that they can no longer meet the agreed upon mortgage payments due to a permanent economic or financial hardship. Extenuating circumstances influence whether or not banks will discount a loan balance and how much of a loss they will take. These circumstances are usually related to the current real estate market, the borrower's financial situation and the lenders own internal motivation. When the home is sold with lender approval of a Short Sale the buyer's mortgage broker, all real estate agents/brokers, loan officers, title and closing agents all retain their profit.
All remaining proceeds of the sale go to the lender as satisfaction of the debt/mortgage note. The property would then transfer to the new buyer clean and clear of the sellers obligations.
Short Sales are a relatively complex and highly specialized type of real estate transaction due to the wide-ranging group of parties, parameters and processes involved.
When they are not handled by a knowledgeable and experienced professional short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure.
For this reason the best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists and real estate lawyers who specialize in short sales.
There is no regulatory agency governing short sales. It is all about negotiation with the lender through communication with a bank's loss mitigation or workout department. Today lenders may accept short sales whether or not a Notice of Foreclosure has been issued or recorded with the locality where the property is located. However when a home owner is delinquent long enough on their loan it will eventually put them in default of the note and soon to face foreclosure. This is the greatest motivation a lender could need in order to do a short sale.
Their may be another party with an interest in-between the bank and their own loan who may have the ultimate say-so in negotiations. Such entities could include a loan servicer, another investor and a mortgage insurer. All have to approve the Short Sale which could take additional time or kill a short sale. This could cause substantial delay in approving and closing the short sale. Secondary lien holders such as a second mortgage, HELOC, judgment or tax lien holders also have to agree to the short sale and reduce their lien interest in some amount or another. Often times the senior lien holder has certain limits as to how much a junior lien holder can receive. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale.
Disclosures:
This is in no way a legal guild of any type, this is just an overview. There are no tax or legal advice conveyed here in anyway. We are required by law not to give any legal or tax advice or opinions on tax or credit ramifications to your decisions is such matters. You should consult an attorney of your choice who is qualified on such matters. Different lenders have different policies and procedures which vary from case to case and all short sales differ from any other transaction. Call us today if you hava any questions about the content of this page.
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