The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan(s), and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
This situation can be a great deal for buyers or investors. This process can take longer than typical transactions, but the wait can be worth it.
In today's market, this situation is becoming all too common. For example, One year ago, there were less than 50 short sales marketed in the MLS (Ada and Canyon County). Now there are over 300! This means banks are beginning to competing with each other. And if you are looking to sell you home, you'll now be competing with the banks.
It is important to understand that extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.
A short sale typically is executed to prevent a home foreclosure.
Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.
In short; A short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.
The whole process starts with a notice of default. It's filed after an owner misses a series of loan payments. This notice is filed at the county where the property is located and becomes public record.
As bad as this sounds, once that happens, investors and real estate agents spring into action in an effort to explore the opportunity. In all honesty, this is the best situation for the seller if they are unable to catch back up with the lender. It can be far better for the owner to exit the loan obligation in a short sale process then actual foreclosure. It means the seller has a chance at preserving their credit.
No comments:
Post a Comment