What is a Short Sale?

Simply put, a short sale is an agreement to allow a home to be sold for less than the amount owed on the loan, which can be a helpful compromise for everyone involved.

A) For debt-ridden homeowners or those who owe more than the house is currently worth, a short sale could save them some of the mental anguish, embarrassment, and major credit challenges associated with bankruptcy and/or foreclosure.

B) For lenders, it helps avoid the hassle, time and expense of seizing and auctioning off delinquent real estate. Mortgage lenders are not in the business of holding homes at REO (Real Estate Owned) in hopes that it sells quickly, terrified that the house will sit vacant for months on end possibly encountering broken water lines, leaking roof, or even worse. The lender will also have to write off other costs such as attorney fees, back taxes, back mortgage payments, back interest,  repairs to make the home marketable.

C) Lastly, for potential home buyers and real estate investors, a short sale offers a great opportunity to purchase property at a significant discount especially in today's extremely tight credit environment.

While short sales are not by any means common or easy to finalize, they are an appealing way for all parties involved to gain some type of benefit. If you believe a short sale could be the correct choice for you, please complete our confidential information form and let us know your situation.

Short Sale Continuation

It's important to note that short sales occur at the sole discretion of the existing lender or servicing company. Lenders are not looking to bail out borrowers who simply overextended themselves during the recent real estate boom. If you're a "flipper" with 2 or 3 homes that you weren't able to unload before the market turned, or if you have other assets or income that could easily cover your mortgage debt, it's not likely that a lender will accept a short sale proposal. Even if you have a qualified hardship only about 70% of files submitted are accepted.

Lenders in most instances will request a professional real estate agent be brought in up front to put the house on the open market for a duration, thus proving to the (sometimes out of state) lender that the house is not moving or being shown due to our slow market. An experienced real estate professional becomes invaluable to your cause. A good real estate agent has not only successfully negotiated short sales in the past, he or she will also have access to qualified investors such as "Hansen Financial Investments" who are well-versed in the substantial risk and reward involved in this extremely complex and often drawn out process. Some lenders will look forward to working directly with a real estate investor such as "Hansen Financial Investments" in an effort to quickly move this house from their inventory. Please submit your confidential information allowing us to assist with your choices.

In most cases, a lender will only consider a short sale if a borrower has clearly suffered a serious financial hardship that directly caused him or her to default on the mortgage. This hardship means the loss of a job, a serious illness, or the death of a loved one - something devastating and "unforeseen" that can justify such a state of financial disrepair. A written declaration and supporting documentation demonstrating financial hardship and an inability to make payments will definitely be required by the lender in order to even consider a short sale. This may include pay stubs, tax returns, and liquid asset statements, among other documentation. In many situations, the borrower would be at least 91-days delinquent before a lender will even discuss a short sale.

New hardships are arising in our slow market. Many homeowners in new homes purchased in 2004/2005 are finding that the builders are discounting their inventory homes as much as $70,000-$80,000 under what they sold them for a couple years ago. Most homeowners do not have this kind of savings to bring to closing in order to compete with builder inventory. These homeowners may be transferred by employment to another state and must move. Most are not able to rent the home out until the market recuperates because the rents have not caught up with the appreciation. They cannot afford a negative income to compensate for the mortgage payment.