What Is A Short Sale And When Do They Happen

Mark Spector RealtorA short sale {occurs} when a person’s property is sold for less than what a person presently owe on the property. If your price of the short sale is close to the market value it is feasible that your finance company may allow a short sale to occur.

Lenders may allow short sale offers or even requests for short sales whether or not a Notice of Default hasn’t been issued. Given the unparalleled and overwhelming quantity of losses which mortgage lenders have experienced mortgage failures that partly brought on the financial meltdown of 2007-2010, they are actually a lot more inclined to accept short sales than any other time. 

Lenders usually have loss mitigation departments which assess potential short sale transactions.  The vast majority of loan companies have pre-determined standards for such transactions, however they may be open to offers, and their willingness will varies.  A lender will generally figure out the amount of equity  (or lack of equity), by analyzing the most likely selling price through an  appraisal, Broker Price Opinion (BPO), or Broker Opinion of Value (BOV).

With regard to “under-water” individuals who owe more on their home loan than their house is worth and are having problems selling, the short sale provides an opportunity for them to avoid foreclosure as a result.

Individuals thinking about a short sale should know about this risk and ask every party involved in the process (Realtor, lender, third party) what can and will be done to protect against a deficiency judgment.  Seek advice from legal counsel within the state where the house is located to ascertain specific pitfalls.

CNBC  reported that a few lenders have been accused of participating in fraud during the short sale process.  The fraud entails lenders in second position demanding  kickbacks  in the form of cash payments from the home buyer or real estate professional, and that are not disclosed anywhere on closing paperwork or  HUD-1  statement.  This is in violation of  RESPA  rules, that require disclosure of such payments.

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If you are thinking of buying or selling a home, condo or investment property call me Mark Spector 310-430-0633