What are Short Sales?
A short sale is one in which the property has yet to be formally foreclosed on, but the lenders have agreed to take less than is owed on the loans to get a payoff on the balance owed.
A short sale typically is allowed by lenders to prevent a real estate foreclosure because they believe that it will result in a smaller financial loss than foreclosing, moreover it’s typically faster and less expensive than a foreclosure. For the property owner, the advantages include avoidance of having a foreclosure on their credit history
Why Do Short Sales Exist?
Short sales exist because owners get in trouble and lenders have found that they can minimize their loss on bad loans by getting the property sold before they have to go through the formal foreclosure process.
Why Are There So Many Short Sales?
Short sales have become especially popular due to the combination of falling real estate prices and real estate financed with low down payments. Many property owners simply owe more on their properties than they’re currently worth, and lender’s rather agree to a short sale and forgive the unpaid debt then to foreclose on the property and re-sell it.
If you’re in this position that your property is worth less then what you owe, call your lender. You may need to make a half dozen phone calls before you find the person responsible for handling short sales, but you do not want to talk to the “real estate short sale” or “work out” department, you want the supervisor’s name, the name of the individual capable of making a decision for a short sale.
It’s not guaranteed that the lender will consent to a short sale, and there are other things that can derail it, but it may be your best option, and you’ve got nothing to lose by asking.
Author: James Kobzeff, June 27th, 2008
