What is a short sale?
A Short Sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property. The property owner cannot afford to repay the liens` full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a ‘deficiency’. Short Sale agreements do not necessarily release borrows from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.
A Short Sale is often used as an alternative to Foreclosure because it mitigates additional fees and costs to both the creditor and borrower. While credit is also typically damaged much less than from a Foreclosure, both often result in a negative credit report against the property owner.
A Short Sale is everything but ‘short’. It can customarily take 6 – 9 months before you are at a closing table. Most homeowners move out of the house while it is going through the Short Sale process. This is a mistake. It could prevent you from qualifying for the ‘HAFA’ Making Home Affordable Program, where you could potentially get a $3,000 moving assistance credit. If you move out, the home begins to fall into disrepair, the banks end up accepting less, leaving you with a higher deficiency.