Sunday, July 20, 2008
What is a Short Sale?
I have been getting this question asked quite often lately with Real Estate in Massachusetts taking the proverbial "big hit".
For those that have been hearing the term "short sale" and don't quite understand what it means, a short sale is a legal lender approved solution designed to assist those home owners who are financially strapped to get out from under their mortgage debt.
A short sale is negotiated through the mortgage holder of an owners home where by the mortgage holder agrees to take less than what home owner owes on the property.
An example of a short sale would be if a home owner owes $400,000 on their current mortgage and their home is only worth $375,000. The lender in this example would agree to take a short fall of $25,000 at closing. In many cases the mortgage holder may completely wipe out the debt and the home owner does not have to repay the 25k.
The home owner benefits in this situation because they get out of a sticky financial mess without going to foreclosure which can seriously damage your credit.
You may be thinking why would a mortgage holder want to allow a short sale? There are a number of reasons, most notably the cost involved for the lender going through a foreclosure proceeding. The mortgage holder when all is said and done can easily spend $40,000-$50,000 going through a foreclosure. This avenue can save the lender money they would otherwise lose.
With property values continuing to drop in Massachusetts there are many more lenders who will consider the short sale route.
As a Realtor representing a seller in a short sale scenerio there some issues you need to be aware of. See Ethics in a short sale for an explanation.
When selling your home and you know you are going to be faced with a short sale make sure you choose to work with a good Realtor who has some working knowledge of short sale procedures! A good Real Estate lawyer in your corner who has worked with short sales would also be an important consideration.
For a more in depth view of some of the other things worth mentioning regarding short sales see Massachusetts Short Sale Realtor.
Here are a few other short sale articles worth reading:
Avoiding foreclosure through a short sale or loan modification
Short sales and deed in lieu of foreclosure
Massachusetts short sale problems to avoid
About the Author: The above Real Estate information on what is a short sale was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356.
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