What is a Short Sale?

Today you hear a lot about short sales--but what exactly does the term mean? A short sale occurs when a seller must sell his or her home for less money than is owed to the mortgage holder on that home. This might occur for a number of reasons; job loss, divorce, job transfer, or other type of hardship. If a homeowner finds himself in the position of needing to sell his property "short" or for less than the lender is owed, the homeowner will either have to make up the shortage at the time of sale with his own funds, or if the homeowner has a "hardship," like those mentioned above, he or she might be able to get the mortgage holder to accept a lesser payment as payment in full.

Although it is called a 'short sale' these type of transactions can take significantly longer to close than a regular sales transaction for a number of reasons. Often, approval can take weeks, even months, to go through all the different channels necessary before the seller is given approval to sell the property at a lesser amount than is owed and the conditions of that sale can be complex. Sellers facing a short sale transaction should obtain legal advice in order to understand all the details involved in tackling their particular situation.

A successful short sale is considered to be less damaging to a seller's credit than a foreclosure, but each individual circumstance is different, so again, legal counseling is extremely beneficial to a seller before making the decision to proceed with a short sale. There can be tax or other consequences also.

For a buyer, a short sale transaction can be frustrating; waiting for weeks to hear whether their offer may or may not be accepted can be very aggravating. A short sale is not necessarily going to be a financial bargain either; lenders are looking to sell the home for the maximum amount possible, so these homes rarely sell for less than market value.  Expect a fair transaction for all parties.

Sometimes, mortgage holders will not agree to pay for customary charges or inspections, or make repairs to the property because they are agreeing to take a short payment already. All of these factors should be discussed with professionals experienced in doing short sales successfully so as to prepare a buyer for any eventuality in the transaction. When making an offer on a short sale, it will help the buyer to know if the seller's agent has had experience closing short sales since most of the responsibility for dealing with the technicalities of this complex transaction will fall to them.

It is important when considering options pertaining to your mortgage and before you decide to hire professionals that offer services such as a short sale that you consult an attorney for advice/

Judy Allison
Berkshire Hathaway Home Services Montana Properties
120 S. 5th St., Suite 201
Hamilton, MT 59840 US
MT DRE License # 17605
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