Frequently asked questions about Short Sales

What is a Short Sale?
A short sale is a sale of real estate in which the proceeds form the sale fall short of the balance owed on a loan.
Who Authorizes a Short Sale?
In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on part of the mortgagor.
Why Would a Lender Agree to Lose Money?
A lender loses significantly more money if they have to incur the additional expenses of a foreclosure, as opposed to accepting a short sale. Lenders are in the business of lending money, not owning homes.

How Does a Short Sale Help Me?
It helps you avoid a credit-destroying and emotionally draining foreclosure process. Avoiding a foreclosure will also help save your credit. Typically a foreclosure will drop your credit score up to 300 points per loan, and will stay on your credit report from 10 to 15 years
I’ve Already Received My Foreclosure Notice. Is it Too Late For A Short Sale?
The short answer is No! There are a few variables, though, that can affect the foreclosure timeline. A qualified Realtor, or better yet a CDPE (Certified Distressed Property Expert) can help you extend the foreclosure timeline up to 6 months, and in many circumstances up to 7 or 8 months. A home sale can be done and approved, up to the day of the bank sale, or auction of the home.
I Haven’t Missed Any Mortgage Payments. Can I Still Do a Short Sale?
Almost every lender will want to see that a potential short sale client cannot afford to pay their mortgage. If you do not have a monthly shortfall but will have on soon due to a payment increase or pending layoff, etc. then they still can qualify for a short sale as long as this issue is verifiable.
How Do I Pay the Realtor Commissions, Taxes, and Other Expenses Associated With a Home Sale?
The homeowner does not pay any of the expenses associated with the sale of the home, such as commissions and other closing costs. Those expenses are paid by the lender. They are, however, included as part of the total shortfall that the owner would be responsible for, if the bank pursues a deficiency judgment or promissory note.
What is a Deficiency Judgment?
In some states the lender can obtain a deficiency judgment against a homeowner for any amount they are unable to recuperate through a fore- closure or short sale. The bank may ask the homeowner to reduce the lender’s loss by making a payment, if the homeowner has any “extra” money in saving accounts, etc. or by a promissory note. In most cases this does require a separate action to filed in court causing the mortgage company to incur further expenses. The mortgage company is also acutely aware of the borrower’s inability to pay so they often see further collections as fruitless.