Short Sale Advantages

A short sale can be a trying and stressful endeavor. Brian Guffey & Associates are experts at helping homeowners get through the short sale process. We walk you through the transaction from start to finish and remain on the front lines to work to get your short sale approved.
Not surprisingly, short sale deals have a high failure rate and often do not close in time to prevent foreclosure when they are not handled by a knowledgeable and experienced professional. If you are behind in your mortgage payments and just can't catch up, then a short sale may be the right decision for you.

Below is information that may answer some of the questions you have regarding the possible short sale of your home.
Short sale: A process whereby a lender accepts a payoff that is less than the principal balance of a homeowner's mortgage in order to permit the homeowner to sell the home for less than the current market value of the home. This specifically applies to homeowners that owe more on their mortgage than the property is worth. Without such a principal reduction the homeowner would not be able to sell the home.
In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. A short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of Equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).
Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This presents an opportunity for borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.

Multiple levels of approvals and conditions are very common with short sales. Junior lien-holders - such as second mortgages, HELOC lenders, and HOA (special assessment liens) - may need to approve the short sale. It is possible for junior lien holders to prevent the short sale.
If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction.
 
Short sales appear on your credit report as "pre-foreclosure in redemption", not as "debt discharged due to foreclosure." Ultimately there is less impact on your credit score.
If you are contemplating a short sale on your home, feel free to give us a call so that you can be better informed on what your options are and whether or not a short sale is right for you.