When facing a foreclosure, what is a short sale?
“When facing a foreclosure, what is a short sale?”
A short sale is when you’re facing a foreclosure and you’re wanting to avoid that foreclosure. A short sale is where you agree with the bank to sell your house for less than what you owe. Here’s an example.
Suppose you owe $200,000, and you get an offer for $180,000.
That’s $20,000 short. You either have to come to the closing table with 20 grand or get your mortgage company to agree to allow this short sale to occur.
The advantage of a short sale is that it prevents a foreclosure because you’ve actually sold your house.
The downside is, you have to get your mortgage company to agree to do this and sometimes that’s a little difficult to do. You also have to wonder, are they going to come after me for that deficiency or that shortness? That $20,000 in my example. Even if the mortgage company agrees to do this, then you’ve got to decide, is it worth it?
A lot of times, you can get them to agree to waive that “shortness” or just not come after you for the deficiency. But, you also need to know how this be reflected on your credit report. There are a number of issues to look at here, but a short sale can be a very valuable alternative to foreclosure.
This is what is broadly termed as “loss-mitigation.”
Normally, the process will be that you must attempt to sell your house with a licensed realtor.
If that is not successful, then the mortgage company will let you lower the price for a short sale.
Once you get an offer, then you need to get the approval of the servicer, and oftentimes, the investor as well. That could be a company like Freddie Mac, Fannie Mae, or it could be some trust.
You’ve got to get those guys to approve the short sale and then, ultimately, there’s paperwork that must be taken care of. There is a lot involved in it, but if you are trying to avoid a foreclosure, then a short sale is certainly an option to consider.
If we can help you, feel free to call us at 205-879-2447 or fill out our online contact form here.
Thanks for watching the video and reading this article.