Short Sale Definition, is it right for you as a buyer? as a seller?

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Short Sale- Definition

Keller Williams Realty
3001 Lava Ridge Ct suite 100
Roseville Ca 95661
Tammy Pecht Realtor
916-425-8305

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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. [1]

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, sometimes
(but not always) in full satisfaction of the debt. 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 (also known as a Broker Opinion of
Value (BOV)) 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.

What does this mean for you as a seller, its a better way out of the home than a foreclosure, you can stay in your home while your trying to sell it
as a short sale, your credit can suffer but not as much as a foreclosure. You will have agents calling to show your home and in this market it will
be often until sold.

What does this mean for you as a buyer, this is a good way to get a home before it goes to foreclosure, however the process can be a long one,
some banks take a long time to negotiate or accept an offer, the good thing is you can put in offers on different homes and you can always
accept or deny the offer if accepted by the bank.