What is a Short Sale Transaction?

A short sale situation occurs when a homeowner's mortgage is more than the property will sell for in the current market and the seller does not have the ability to pay the difference.  For example, a homeowner purchased the home using 100% financing in 2007 for $300,000, but if he were to sell it today it would only sell for $150,000.  As a result, if he sold today he would have a $150,000+ deficiency.  The "+" is because you'll need to include negotiated fees, repairs, agent commissions, seller closing costs, utility/tax/HOA liens, discounted payoff of second mortgage, etc.  

In a short sale situation, the homeowner requests that the lender(s) accept a discounted payoff of the mortgage(s).  In the example above, the first mortgage amount is around $240,000.  If the purchase price is $150,000, then the first mortgage lender must "lower the loan amount" (aka discounted payoff) enough so the sales price covers the seller's negotiated fees, repairs, agent commissions, seller closing costs, utility/tax/HOA liens, discounted payoff of second mortgage, etc.  The lenders are not required to accept discounted payoff, but currently the government is providing incentives for lenders to approve short sale transactions.  

Short sale is a good solution for someone that wants to sell their property versus dealing with the negative repercussions associated with going through foreclosure.  For more information about comparing short sales versus foreclosure repercussions, click here.  

CDPE designees have knowledge, resources and experience average Realtors do not have that helps homeowners maximize their chances for short sale lender approval.    

If you'd like to discuss your scenario with Kevin Nakano, CDPE, please complete the online form and Kevin Nakano will follow up with you within one business day.

More short sale articles, click here.