What Is A Short Sale?

A Short Sale is the sale of a home in which sales proceeds do not fully payoff the existing  loan(s) and the lender(s) accepts a discounted payoff to fully satisfy the loan.

The best part, the existing lender pays virtually all sales costs, including commissions, escrow and title fees and repair costs.  You get your home sold, the loan(s) paid off and you avoid foreclosure.

Why Is A Short Sale A Beneficial Option For The Borrower?

The short sale may not only benefit the lender, but the borrower as well.  By proceeding with a Short Sale, the property owner is cutting their losses as well by selling their home and not having to pay any further amount of money to the lender.  This will enable the homeowner to move on and obtain more affordable housing which may be more within their price range.

Is A Short Sale Right For Me?

Mortgage lenders are increasingly willing to work with borrowers faced with financial hardships to accept a discounted payoff on a mortgage.  If you are faced with a hardship that makes it likely that you will be unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property back through foreclosure.

As you consider the option of pursuing a Short Sale, remember your lender is looking to limit any potential loss on your loan.  By completing a Short Sale, your lender has arrived at a solution that is, for them much better than a foreclosure.

Bottom line, your lender wants to work with you.

If I Do A Short Sale, Should I Seek Legal Advice?

Yes, whether your home is an owner-occupied property, investment or 2nd home there are a variety of different legal aspects to be considered. Every homeowner’s situation is unique.  It is always recommended to seek at least one opinion on the various options available to you, and which one is going to best suit your needs.  The lender has the right in the State of Nevada to pursue a deficiency judgment in the case of a Short Sale, Deed In Lieu or Foreclosure.  It is always best to seek legal advice to fully understand all of the possibilities.

If I Do A Short Sale, What Are My Tax Consequences?

Whether your home is an owner occupied property, investment or 2nd home, it is always advisable to seek tax advice with your accountant or tax advisor.

How Will A Short Sale Effect My Credit?

The big key here is to avoid foreclosure.  By nearly any measure, a foreclosure is the most damaging event your credit status can encounter, even worse than bankruptcy.  In the course of getting your Short Sale approved you may miss your mortgage payments, and these will show on your credit.

By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods, etc) relatively quickly.

My Property Needs Work, Can I Still Do A Short Sale?

Absolutely.  In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn’t.  The lender knows the risk of loss goes up when they foreclose on a property that needs a lot of work.

Aside from the added expense of completing the work, lenders are simply not set up to get the work done.  They are in the lending business, not the fix-it business.

Why Would The Lender Agree To Do A Short Sale?

1. Legal concerns – Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligations particularly when the borrower makes an effort to arrive at a compromise solution.
2. Wall Street is Watching – Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary market.  They need to put the funds back to work by loaning the money again and collect loan fees along the way.  If mortgages perform poorly after they are sold it could impact the lender’s ability to sell their loans on the secondary market.  A successful Short Sale gets the loan payoff received quickly.
3. Asset Management Expenses – If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold.  It is expensive to manage real property assets – homes – spread throughout the region, the state and possibly even the nation.  Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs that the lender would prefer to avoid.  A successful Short Sale eliminates most of these costs.
4. Reserve Requirement – Delinquent and non-performing loans place another burden on mortgage lenders.  For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses.  These funds cannot be put to work generating new loan fees until the bad loans are resolved.  A successful Short Sale lets the lender put more money to work.

Do Lenders Approve All Short Sales?

No, that is why it is critical to work with someone that has extensive experience at getting Short Sales approved.

From the presentation of the Short Sale package to the lender to working with the lenders Loss Mitigation Department, we know how to keep the file moving towards approval.

If I Do A Short Sale, How Much Will I Have To Pay To Sell My Home?

Nothing.  It’s true. In most cases you will pay literally no sales costs if your lender approves the Short Sale.  All commissions, title and escrow fees, and even many repair expenses are paid by the lender as part of the Short Sale approval.