Back to Basics: What is a Short Sale?

"Foreclosure" is a well known term in today's real estate market. However, the lesser known term and most misunderstood phrase creeping into the real estate world is the short sale.

What is a short sale? Simply put, it is when a lender agrees to pay off or agrees to be "shorted" the amount of money a homeowner owes on a specific property. While simple in concept, short sales can be most complicated. It is NOT as easy as the borrower just telling the lender "sorry, I can only pay part of the loan back."

First, the lender must agree to a short sale, and there is a process that must be followed. The reality is such that without the borrower having the right help to guide them through the transaction, the lender may never consider a short sale. So what does a borrower do when they find themselves in a situation where they are behind in their mortgage payments or in the process of being foreclosed on?

GET HELP!

However Beware! If the borrower chooses the wrong person, they will likely end up being worse off than if they simply let the property go to foreclosure. If they in fact get the right help, they will save themselves much grief, embarrassment, and will avoid financial ruin.

The most effective person to help assist with a short sale is a real estate professional - an expert who specializes and/or has experience in negotiating with lenders. So it is critical to seek such an expert.

A real estate short sale expert should be in a position to openly discuss their success in negotiating with lenders. The lender will NOT speak to anyone except the borrower, unless the borrower gives specific written authorization to the contrary. The lender will consider the borrower's cash & other assets on hand as well as the borrower's total financial position. With that said, given the choice of a short sale verses foreclosure, the lender will likely pursue the short sale option , as this option will generally cost them significantly less money than foreclosing on the property.

Given the borrower's financial condition, one of the lenders biggest concerns is the borrower declaring bankruptcy in the middle of the lenders foreclosure proceedings. In such a scenario the lender doing a short sale would benefit everyone involved.

In conclusion, it is important for every borrower to learn to recognize the signs of trouble, be willing to ADMIT if they are having problems meeting their mortgage obligations and do something about it. The embarrassment and financial ruin of a foreclosure or bankruptcy is far worse than having to contend with a short sale.

If a borrower is unsure of whether or not they are a candidate for a short sale they should immediately seek out a professional's opinion of their situation.

For more information about short sale or other real estate questions, contact Sandy's team at (225) 677-SOLD or email info@sandyco.com We are here it help you in East Baton Rouge, Livingston Parish, and Ascension Parish.