Short Sale Information

Upside Down in your Mortgage?
You Have Options!

Upside down on your home?
Need out of your situation?

Can’t make your payments?

Need to relocate?
If you answered
Don’t make a move until you contact a Coldwell Banker McMahan Sales Associate .
You may qualify for a Short Sale & be eligible to sell your home at no cost to you.
A Short Sale Explanation

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor.   This negotiation is all done through communication with a bank’s loss mitigation or workout department.   The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender.   In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance.   These circumstances are usually related to the current real estate market and the borrower’s financial situation.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from a Broker Price Opinion (BPO)  or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. 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. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
Short sale homeowner benefits:
Avoid stress of foreclosure sale; honorable exit to a difficult situation.  Homeowners can typically live in the home until the new owner closes, giving time to make other living arrangements.  Foreclosure is postponed and collection calls will stop once a written, signed offer is received and approved.
The Impact of a Short Sale:
Homeowner Impacts-
Credit report will state “paid off in full for less than full balance.”Reestablishment of credit may be required to qualify for a new mortgage following a short sale.
There may be tax implications.  The homeowner should speak with their tax advisers about the tax implications of a short sale.

Homeowners should be aware of:

  • Buyers cannot be anyone the homeowner has a close personal or business relationship with, including family and friends.
  • Homeowners are responsible for making their mortgage payments while the home is on the market.
  • Mortgages in bankruptcy require special consideration.
  • Homeowners should speak with their mortgage company to discuss their options.
Possible Obstacles to a Short Sale:
  • Unrealistic expectations
  • Timeliness do not follow typical offer-to-close time line
  • Price ‘low ball’ offers due to market conditions
  • Excessive seller concessions and costs
  • Offer does not meet investor guidelines
  • Mortgage insurer requiring promissory note
  • Processing delays
  • Valuation delays
  • REALTOR and customer required documents missing or not signed and dated properly
  • Team not fully engaged
  • Buyer’s REALTOR working short sale without homeowner engaged
  • Buyer REALTOR often considered an unauthorized third

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©2008 Molly McMahan and Coldwell Banker McMahan. Coldwell Banker® is a registered trademark licensed to Coldwell Banker Real Estate Corporation. All Rights Reserved. Corporate Office - 6402 Railroad Avenue, Box 306 - Crestwood, KY 40014. Each Coldwell Banker office is independently owned and operated. Equal housing opportunity. Equal opportunity employer.
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