A short sale is when a homeowner sells a property for less than the outstanding mortgage balance and has the lender forgive the remaining balance. Short sales are meant for those that are undergoing extreme financial hardship, and due to circumstances beyond their control, cannot sell their home for enough money to cover their remaining mortgage balance. For the homeowner/short seller, the main benefit of a short sale is avoiding the lengthy foreclosure process. Also, short sellers usually avoid having to pay off the balance of their loan and will incur less damage to their credit score than if they had to go through with a foreclosure.

For the lender, a short sale is typically faster and less expensive than a foreclosure. The lender agrees to receive an amount less than the full balance due instead of having to foreclose and then owning the property which they would then have to try and sell. Lenders do not want to be in the real estate business, and they do not like to keep an inventory of properties that they have foreclosed on. Lenders also stand to lose a lot of money if a property that they own goes to auction where the property could be sold at an enormous discount. Lenders are usually better off taking a short sale discount upfront, and thus avoiding the extra fees and time of a foreclosure and then an auction. Therefore, if a lender sees an opportunity to sell a property without a huge loss through a short sale, they will usually do it.

The lender typically has the final say in whether or not they will agree to forgive the unpaid portion of the loan. A lender will choose to allow a short sale if they believe that it will result in a smaller financial loss to them than a foreclosure would. Many factors are taken into account when lenders make these decisions and they are typically handled on a case by case basis.

At S.J. Packman & Associates, before we make any recommendations, our attorneys, certified debt specialists, and paralegals, are trained to ask the right questions to find out about your specific situation. Based on your current income and your financial hardship, we will determine which course of action will work best for you. We do not only offer one path, as there is no one process that can solve everyone’s needs. We will take our time with you and help evaluate what your best course of action should be. Call now and one of our advisors will be there to get you started on your path to financial freedom. There is no obligation to enroll, so don’t delay.