bank rates credit cards insurance finance

What is a Home Mortgage Short Sale?

Johns Wu Posted in Foreclosures by Johns Wu
January 23, 2008 03:39 AM - 12 Comments

HOME SHORT SALEWith the foreclosure rates jumping across the nation, more and more homeowners are faced with quickly selling their home in order to avoid foreclosure. Yet, the housing market is so flooded in some areas that houses can sit on the market for several months, and sometimes years, before they sell. If you are an individual looking to sell your home to avoid foreclosure, what options do you have?

Home Short Sale : A process by which you sell your home for less than you owe on it.

In recent years, the popularity of the short sale has increased due to rising loan defaults. A short sale is a process by which you can sell your home for less money than you owe on it. Although still not a common way to avoid foreclosure, the short sale can work if the mortgage company is willing and your buyer is committed.

Negotiate with Your Mortgage Lender to Work out favorable Short Sales Terms

Your mortgage company will consider several factors before approving a short sale. And, ultimately, the decision to approve the sale is completely up to them, so you and your buyer will want to be as cooperative as possible. Short sales often take longer to implement than a standard home purchase, so you’ll also need to be patient.

The mortgage lender will want to know the circumstances that caused you to fall behind on your mortgage payments and what your future financial prospects for repayment may be. They will also do their own assessment of whether it is more profitable to approve the short sale or repossess the property and put it on the market themselves. Although most mortgage companies are helpful, their goal is to make money so they can ultimately decide to proceed with foreclosure.

Don’t Drag Your Co-signer Down With You!

If you have a cosigner on your home loan, the lender will want to investigate the chances of obtaining payment from the other party(ies) and they will also look to see if you have any other properties currently in default before approving a short sale.

Related Posts from the Past:



Comments (12)
1 Star2 Stars3 Stars4 Stars5 Stars (5 votes, average: 4.4 out of 5)
Loading ... Loading ...
12 Existing Comments

Add New Comment

  1. KJones said:
    on July 26th at 05:52 pm

    Doing a short sale can be a heart wrenching ordeal. It is very important for you to realize that you are doing this to try and protect yourself. Using this type of process to get out from under the mortgage that you can’t afford, does not mean that you are “giving up”, so DON’T give up!

    While you are gathering the information to present to the brokers and finance companies regarding your extenuating circumstances, you will be reviewing most of the mistakes that you have made that have put you in this credit disaster. So, during this gathering time, I recommend that you learn from your previous errors and make notes not to repeat them.

    You will be on top of things eventually, take care not to ever have this fall on you again. Be smart and careful. Sometimes disaster happens without us being able to predict or prevent and that is why you need to build a small nest egg for such cases so that you will not lapse on your house payment.

  2. Amadeus said:
    on July 27th at 09:02 pm

    Much like the decision whether to go FSBO (for sale by owner) or hiring a real estate professional when your selling your house under normal circumstances, the same argument for hiring a broker when it comes to short sales also applies.

    That argument is that the money saved in broker fees may very well not be as much as you would have saved by employing the expertise of the real estate professional. When it comes to complex and highly technical matters such as are involved in short sales, I think this holds especially true.

    While it may seem totally counter intuitive to go out and pay thousands of dollars to a real estate broker when you’re already scraping for every penny, chances are by doing so you’ll save yourself lots of headaches and most likely lots of money.

  3. James said:
    on July 28th at 04:08 am

    One thing that you should look at is whether the debt forgiveness is taxable either as a capital gain or as income. On paper your assets have increased, even though in reality the situation is pretty much the same as before. There is a chance that the tax authorities will not persue you because you may have no chance of paying - but this could be an issue. I’ve a UK tax background, so if someone with a US tax background could comment more I would be grateful.

  4. ciscogrove said:
    on August 1st at 01:52 pm

    A word or two about short sales. One, they won’t work if the loan is a VA or FHA or other government insured loan. The reason: The lender gets paid either by a foreclosure investor at the time of sale or by the Gov immediatley after the sale.

    Two, most people start the process too late into the foreclosure process. The lender, unless extremely motivated, won’t cooperate. They won’t cooperate because they know it will either sell at auction or it will be listed at market value w/a realtor and will be sold.

    Three, most real estate agent are clueless when it comes to short sales. I used to be a real estate broker dealing in foreclosures. The most common question I was asked by agents was, “How do you make any money with foreclosures?

    Pay attention to the question. Far too many can’t figure out how to make any money so they don’t tread in that arena.

    I’m not bashing real estate agents, I’m simply stating fact in the market I was in. When I switched hats and became a mortgage banker, I found something interesting.

    We called them bottom feeders but these lenders were officially dubbed sub prime lenders. They actually did not shy away from people in foreclosure.

    These types of lenders still exist. You’d be smart to make that your second step. First step is to talk with your lender and see what they are willing to do.

    Enough said. Good luck.

  5. gkr said:
    on August 5th at 02:53 pm

    Mortgage short sale happens generally before foreclosure by the lender because the homeowner is unable to pay the debts on time. Even a short sale of house without a mortgage can happen because the homeowner has a need for huge amount of money for some task ahead. Whatever is the case short sale always results in dissatisfaction when the market value in the real estate is growing.

    Before engaging in short sale it is better to consult a tax advisor. Estimate the sale price and find the difference you get after paying mortgage debts. There is a chance that the IRS will consider this difference as income and levy taxes on it.

    You can get out of this if you can prove that you are insolvent. Insolvent means that your debts are higher than your assets before the lender approved the short sale. Tax advisor will let you know if you are insolvent by the IRS standards.

  6. Robert Aldana said:
    on August 30th at 03:30 am

    I invite you to view my interview with CPA Manuel Alvarez on my television show “Let’s Talk Real Estate!” as we discuss the tax consequences of a Short Sale and Foreclosure. You can view the show online at:

    http://www.letstalkrealestate.com/ltretelevision.htm

    It is also available in Spanish. Best of luck!

    Robert Aldana
    REALTOR and Host of TV & Radio’s “Let’s Talk Real Estate!”
    http://www.letstalkrealestate.com

  7. Concerned Mortgage holder said:
    on September 22nd at 03:31 pm

    Concerned Mortgage holder

    I have an adjustable rate interest only loan that is due to reset next July. It is in my husbands name only. The house is in both our names. We got this house with 100% financing. We are making the payments fine. Our hope was as was most people’s 2 years ago is that the value of the house would go up and we could get better financing in the when the 2 year prepay was up. Because of the 2 year pre-pay and the value of the house stagnating, we could not refi before the prepay was up. Now we are in the position that our house is financed at 100% of value or less and might not be able to get the house refinanced. In the town we live in it is a small town and there is an abundance of houses on the market. My husband and I do not want to loose our house when the loan resets but we may have to walk away. The things we have in our favor is I am not on the loan and I have excellent credit. Wed could rent a house like ours for about 800 a month less than what we are paying. So with my credit and my income we could get a rental and not be homeless easier than we could re-finance our house. We do not have the money to pay our house down to 80% of value or even 95% of value in order to refinance when the time comes. I believe there are a lot of people who are in my position. We could pay the mortgage payment for our entire house if we could refinance it. The problem is the value of the house has probably dropped since we bought it and one cannot get financing for 100% much less more than 100% of value. I believe the market will eventually turn around and my home will be worth what I paid for it and someday even more. My husband and I just want to stay in our house and eventually pay it off. Because of the problems with the market that my not happen.

    What I propose is that the note holders extend the fixed rate term of the note for 5 years or so until the market is better and then adjust or refinance the homes to a fixed rate. They will loose the interest that they may have made if the note adjusted and the people who owe on the note keep paying there payment. However, if the people on the note just rent a home before there credit gets bad and move out and send the keys to the bank who is servicing the loan. The note holder will loose a lot of money when this happens. They still have to foreclose on the house and then they have to sell the house in a very down market. This is happening all over the United States Today.
    This scenario could all be stopped by extending the current payment arrangements until the market picks up enough for the people to refi their house or the income goes up enough to pay the adjustable after it adjusts. The note holder would earn the current interest on their money and not have to reposes the house in a market where so many homes are being repossessed and cannot be sold. This would bail out both the buyer and the note holder from a bad situation. The second note holders are the ones that will be hurt most but the first holders are not in that great of shape given how the prices are going down in some parts of the country. A piece of something is better than 100% of nothing.

    I think this is a good proposal however I have no idea how to pitch it, and whom can I pitch this idea. I would go to the banks but most of the banks that you pay your payment to only service the loans they do not own the loans. Does anybody know where I can go to spread my idea so the it will be taken under consideration? I have talked to a few people in the mortgage market industry and they think it is a good idea. Can someone help me? I can be contacted by e-mail at astrial@earthlink.net.

    Thank you for any and all help.

  8. anony said:
    on December 26th at 07:06 pm

    Is it legal to short-sell your home to a family member?

  9. asdasd said:
    on February 23rd at 04:22 pm

    lkjsdklfdsf

  10. John said:
    on March 4th at 08:51 am

    Here is a great article on second mortgages that I would like to pass on
    http://www.shortsaledeals.com/secondmortgages.htm

  11. Johanna said:
    on June 3rd at 08:35 pm

    Can someone please help me with this.

    Can I purchase a home in California that is a short sale using an FHA loan? In other words can an FHA loan get me a short sale property?
    Thank you for your help!

  12. amwgrad2011@yahoo.com said:
    on June 25th at 10:10 am

    I am in process of purchasing a short sale home, is there anything I should know or watch out for? Thanks

© 2008 Bankaholic® - Tracking the best CD rates.
privacy policy - contact us - affiliates - press