I recently took a class to educate myself on Short Sales because it is a growing trend in the real estate world due to the number of people finding themselves unable to sell their properties for more than they owe on the property. You may not be familiar with the term “short sale” so let me take a moment to explain what a short sale is. A short sale occurs when the lien holder (your lender) accepts less than the amount owed on the existing mortgage of your home.

You might ask why would a lender do a short sale? There are a lot of costs associated with taking a house through the foreclosure process (lost interest, attorney fees etc). Lenders use a model that gives them a net figure that they will ultimately re-coop, should the entire process be exhausted. As with any business, when it becomes apparent that losses will be incurred, working to limit the amount of losses to the investors that have backed the loan becomes priority and because a short sale is less expensive to pursue that is how a short sale can be beneficial to a lender.

You may also be wondering how long does a short sale take to complete? All lenders work differently, sometimes a short sale can be submitted and an approval can be obtained in as little as three weeks, on the other hand the approval can take up to 3 months. The best way to shorten the approval process is to work with a real estate professional that knows how to submit a complete and professional package to the lender from the beginning and make timely follow-up calls to ensure the package is being worked properly. It seems as if there is a huge need for real estate agents that know their way around this subject and are qualified to put together a professional and thorough package that will get the lender’s attention. I look forward to putting the knowledge I have gained to work to help people who are finding themselves in difficult financial situations and are not able to sell their real estate due to the shift in the market and want another option other than foreclosure.

How can you decide it you are a candidate for a short sale? Your mortgage payments must be at least 90 days delinquent, your debt-to-income needs to show that you cannot afford the current debt, a hardship has occurred in you life, and the current loan-to-value isn’t enough to pay all closing costs and satisfy the mortgage. While short sales offer a much better solution than foreclosure it is no easy road to a successful sale. Furthermore there is no guarantee that you will walk away with a “clean” credit report; it will in fact only bruise your credit rather than ruining your credit for up to 10 years with a foreclosure on your credit report. Also there are no guarantees that the lender will accept the offer that is submitted but I have techniques to help determine if the offer is something the lender would consider and justify a short sale rather than a foreclosure in the eyes of a lender. Another important thing to negotiate with a lender is for a satisfaction of mortgage and that all deficiencies will be waived. Meaning that your credit report will reflect that the mortgage was satisfied and that any remain balance is waived by the lender. If the lender is not willing to waive the deficiency the seller will have an unsecured note, payable over a long term with no interest for the deficiency amount. The small deficiency balance is still better than having to go through a foreclosure and having the negative effects of a foreclosure following you for many years to come.

If you would like more information on Short Sales please contact me at Debbie.Chaky@LiveFLA.com. I would be happy to provide you with more information on buying or selling a home involved in a short sale.