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what is a short sale?

  • February 02 2011 - Camino
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Answers (4)

Not sure if you are asking this question from a potential seller or a potential buyer.  Potential seller and explanaion of a short sale have already been answered.

As a potential buyer of a home that is a short sale they usually have some additional issues -- mostly timing and communication.  The Bank that is going approve the short sale price usually will take a very long time in responding and they are reluctant to put money into the property to fix it up.  Make sure all the professionals involved Realtor(s) and lender are experienced in short sales.

  • February 03 2011
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A short sale occurs when the sale price of the house is insufficient to cover all liens on the house plus seller costs, and, in order to avoid bringing cash to closing, the seller asks any lien holder whose debt is not satisfied by the sale proceeds to allow him, the seller, to close without bring cash to closing.  

Example: You sell your home for $100,000, but there are 2 liens on it for $80,000 (owed to the bank), and $20,000 (owed to the guy who put in your pool).  Assume you owe commission and attorney fees and other closing costs of $7,000.  So you would ask the pool contractor to let you sell the house $7,000 short, (for $100,000, which is $7,000 short of the $107,000 amount you would have needed need to sell your house for to avoid bringing cash to closing).  You'd then take that $7,000 you didn't pay the pool contractor, and use it to pay the commission. attorneys fees and other seller side closing costs.  

So even though the sale price ($100,000) equals the amount of the liens ($100,000), you still have a short sale situation because of other unsecured costs that seller must pay at closing. 

If the pool contractor releases his lien, he has a right to pursue you for a deficiency judgement in the amount of $7,000, unless he waives that right. These situations can become tricky, especially when there are multiple lien holders whose permission is required to sell short.  Linda is dead right - find an agent experienced in short sales to help protect your interests.
  • February 02 2011
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Short sale is selling your home for less than you owe.  If you are thinking of doing a short sale, please work with an experienced agent who can help you negotiate your loan.  Short sale is different from a standard sale.  Please note that there is what they call deficiency judgment.  With the recent laws, 1st lien's are now protected from deficiency judgment whether they are a recourse (refinance) or non-recourse (purchase) loan.  However, anything beyond the 1st lien is no longer protected and this is where an experienced agent will need to negotiate.  In addition, some lenders will also require the seller to make some contribution before the lien is released and short sale approved.  An experienced agent will be able handle all these issues on your behalf.
  • February 02 2011
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in simple terms, it is when you owe more than the current value of the house and you try to sell it.  in this case you would have to get approval from the bank to let you sell the house for less than what you owe on it.
  • February 02 2011
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