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what exactly does "short sale" mean?

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April 22 2010 - New York
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Answers (12)

Defenitions of Making Money in A Down Market 

This is a blog I write about REO's and it gives you all the details of short sales in the defenitions area.

Good Luck

Andra Rosiello Matera
Charles Rutenberg Realty
Plainview NY
917-750-9855
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February 18 2011
Seller and the lender agree to take less than is owed on the home....it can be a long process, be patient!
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July 11 2010
Read the The Mortgage Debt Relief Act of 2007.  It was implemented by GW Bush under advisement by Goldman Sachs and a few other high powered individuals who became aware of the ramifications that were to affect millions of homeowners based on the mortgage bankers and brokers deeds and actions. 

Somebody knew what was coming down the garden path prior to 07! When they implemented that rule, they had at the time indicated the market was  coming down 15-30%.  Boy were they wrong...try 65%.  Not an easy thing for many folks today to come up with to pay the difference of what the values are and what they owe with negative am thrown in when they have an adjustable resetting.  Particularly when they need to move to find a job elsewhere.
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July 09 2010

Lots of great answers here.  Let me add this to the discussion.

In case you are familiar with the term short sale from the stock market, you probably know that when someone sells a stock short, he sells a stock he does not currently own.  This is done by borrowing a stock from an investor and selling it at current market price.  When he wants to close the position, he buys back the stock and delivers it to the investor who he "borrowed" the stock from.  The profit or loss are determined by the difference between the sale price and the purchase price.

In real estate, the term short sale has nothing similar to the term used in the stock market!

I real estate, when a homeowner sells his house and the net proceeds from the sale of the house do not cover the outstanding balance of the loan(s) on the house, the homeowner will need to bring cash to close the deal (pay off the loans).  However, if the homeowner does not have the cash to close the deal, the deal cannot go through and close unless the lenders approve it.  If and when they approve it, the deal closes.  And since the lenders did not get all that was owed to them when title transfers, it is a short sale.

There are many factors as to why a bank(s) may or may not approve a sale that does not pay all that is owed on the house.

As to the P&L statement, bank loses money and reports a loss on its return.  The loss of the bank is the gain of the homeowner, reported as income on his return.  So there can be tax consequences to this transaction, so it is recommended to consult with a Tax professional.

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July 08 2010
Short sales close typically within 30 - 45 days after acceptance by the lender.
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July 08 2010
The seller is selling the property "short" of what they owe their lender. This means that the lender will have to approve any potential offers...as they will be agreeing to accept less than what they are owed.

The seller will not receive anything upon the sale of their property except for negative remarks on their credit report & possibly other liens/deficiencies from their lienholder. But, the lender pays all real estate commissions, closing costs, etc.

The term "short" sale can be misleading because you're usually in it for the long haul...many of them typically take somewhere between 3 - 8 months to gain lender approval and close.
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July 08 2010
it's a term used often when the buyers between 4'9" - 6'2" are looking for a great deal from someone who is having a hardship that has to sell for less than what they owe on their mortgage

I've had some that were only 4'8" but very qualified.

The sellers tend to be hunched over giving the appearance of being much shorter than they are and very stressed out.
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July 08 2010
a short sale will occur when the mortgage amount or (amounts if more than one mortgage) on the property exceed the current market value.

the homeowner has experienced some hardship (illness, loss of income etc) has exhausted all funds available and credit and can now no longer make the mortgage payments.

the house will then be offered on the market as a "short sale"..
meaning the bank will have to approve the offer as they are taking the loss on the loan.. or if 2 banks or more are involved all need to be in concert that monies are acceptable..

very extensive paperwork involved on behalf of the seller and must be done correctly or will be placed at the bottom of the pile by the bank and not looked at with the volume that they currently have..
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July 08 2010
A short sale occurs when a seller can prove hardship to the lender--and when agreed-- it means the lender is accepting less than the total amount due--keep in mind that the seller can accept any offer he/she wishes, but it's up to the lender to decide to accept, reject or at times counter offer.
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April 28 2010

It occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with lender.

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April 28 2010
The seller is unable to continue making mortgage payments and to satisfy the debt they will ask the lender to accept the highest offer as the total payoff.
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April 22 2010
The short sale occurs when a borrower (the home owner) cannot pay the full amount owed to the bank. The lender (bank or investor) then may accept the lesser (short) amount.

In a short sale the holder of the note (the lender) loses money.

In some cases. the borrower, however, may still have to pay the balance of the debt later. It is a messy situation for everyone. Short sales tend to be more complicated than ordinary sales and can take much longer to close though new regulations may help.
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April 22 2010
 
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