What is a Short Sale?

What is a short sale? I hear this question every day from clients, customers and even people in the real estate industry. Recently, because of the current real estate market, homeowners find themselves in a situation where they can no longer afford their payments or they cannot sell their home for what they owe.

When people find they can no longer afford their mortgage payments and get behind on their mortgage, the bank or lender will consider taking less than they are owed on the loan. This is called a short sale. A short sale is a pre-foreclosure (the period after the loan is 30 days behind - in default - and before foreclosure) where the bank agrees to take less than what is owed to them on a home.

In this situation, they can contact a realtor and start the short sale process. The realtor will contact the bank (or lender) and order a short sale package, which the homeowner fills out to show they have circumstances that warrant the sale of the home for less then they owe. The package includes a hardship letter (stating why they can't afford to stay in the home), and a list of documents such as: personal tax information, pay stubs, job termination letter and any other relevant documentation. Circumstances leading to the short sale request may include divorce, job loss, loan payment increasing because of an adjustable rate mortgage, job relocation, etc. This is something the homeowner can choose to do as a 'for sale by owner' as well, but it a difficult process even for realtors who do this on a daily basis, so be forewarned.

What are your thoughts on 'short sales'? Please leave any questions or comments and we will address them. You can also contact me for more information: angelamcdonald@qwest.net or call Angela McDonald Real Estate at (602)369-6409.