What is a Short Sale?

 What is a short sale?

How long will it take?

But my house is going to foreclosure, will I have enough time?

Can I stay in the house?

How do I know this will work?

Will I get any money from the sale?

What happens if this doesn’t work?

What is the difference between a “RELEASE” and a SATISFACTION?


What is a short sale?                                                                        <TOP>

A “Short Sale” or “negotiated settlement” or “short pay” occurs when a Lender agrees to accept less than the amount owed to payoff a loan as an alternative to foreclosure.  If the property is worth less than the amount owed on the loan, then even if the Lender forecloses and takes back the property, they know they are going to take a loss.  We can often convince a Lender that they will “do better” if they take less than what is owed now rather than taking the property back by foreclosure and trying to sell it later.


How long will it take?                                                                       <TOP>

The Short Sale negotiation process is a lengthy one.  It may take several weeks or more likely several months to get an approval.  Many Lenders have several layers of bureaucracy, insurers, and investors that we will have to maneuver through in order to get the Short Sale approved.  So it is important to be patient during this long process.


But my house is going to foreclosure, will I have enough time?

Maybe, maybe not.  Just starting a Short Sale does not automatically stop a foreclosure.  However, many times we can convince a Lender to stop the foreclosure to let us attempt to negotiate the Short Sale.  So, while there are no guarantees, it is in your best interest to try the Short Sale.                                             <TOP>


Can I stay in the house?                                                                         <TOP>

The key word in “Short Sale” is sale.  The purpose of a Short Sale is to get the property sold.  This is not a program that can stop foreclosure and allow you to keep the house indefinitely.  It will be easier to sell the house if it is vacant, so you should make plans to move as soon as possible.


How do I know this will work?                                                            <TOP>

You don’t.  We cannot, have not, and will not make any promises to you that the Lender will accept a Short Sale.  Once you missed a payment, the Lender is in charge and can proceed to foreclosure if they want to.  But we know they do not want to and we are very good at presenting alternatives to the Lender that they often prefer to accept rather than foreclose.  We are very good at what we do, but NO PROMISES or GUARANTEES are being made as to whether or not the Lender will accept a Short Sale – they may or may not.


Will I get any money from the sale?                                                <TOP>

NO.  A universal requirement of Lenders granting a Short Sale is that the borrower will not get any proceeds from the sale of the property.  The Lender is going to take a loss on your loan – they are not going to let you get any money.


What happens if this doesn’t work?                                                <TOP>

Your house will likely go to foreclosure.  A Short Sale is something we try after you have exhausted your other options.


What is the difference between a “RELEASE” and a SATISFACTION?                                                                                             <TOP>

A Release is where the Lender may offer to “release” its security interest against the property in exchange for less than the amount of the note.  However, the remaining debt on the property is still not satisfied.  A Satisfaction is where the Lender agrees to accept less than you owe on the balance of your mortgage as a complete and final “satisfaction” of the debt and the mortgage lien on your property.

Advantages of a Satisfaction:  Your note obligation and mortgage encumbering the property are both satisfied for less than what you owe.  When your property is sold, the debt is paid off completely.

Disadvantages of a Release:  Since the remaining debt on the property (sometimes called a “deficiency”) still exists, you may have tax consequences and receive a 1099-S form from the Lender reflecting the amount of debt forgiven.  You may then have to pay taxes on this amount and although there are exceptions, you are urged to consult with a tax advisor regarding your options.  Also know that the Lender is not obligated to provide you with a 1099-S for the debt forgiveness income and won’t be penalized for failing to do so.  It is at the sole discretion of the Lender whether they choose to give this to you or not.


If the Short Sale is successful, it is a win-win situation for all of us.  You win because you save your credit from a tremendous hit since a foreclosure will remain on your credit for ten years.  This makes buying another house impossible for a long time.  And yes, you will have late payments showing on your credit report, but as long as foreclosure does not occur, after twelve months of good rental history, you will be able to get a new mortgage and buy a house once again.  We win because once the short sale is approved, and we buy the property or find a buyer for the property and make our profit that way.  Bottom line is, if you don’t win, neither do we!  The Lender wins because they can dispose of the property quickly instead of holding onto a non-performing asset which in the long run hurts them financially.  Besides the Lender is in the business of lending money not selling real estate.


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