Simply stated a short sale of a real estate property is where the earnings from the sale of the home are lesser than the balance of the loan owed. The main reason this is done is to avoid foreclosure on a property.
In this particular arrangement, the bank or lender will work with the owner of the home to sell it at an amount lower than that of the balance of the loan. When the home is sold, the funds attained by the sale will be transferred to the lender or bank whereas the lender may agree to exchange the funds for the full amount of the debt. Even so, this is not always the case. This is decided by the Loss department within the financial institution.
The main reason that the financial institution would work with the owner in this respect is if they see it more financially beneficial to receive the amount paid for the home, than what they would receive in selling the home in foreclosure.
One of the other advantages of a short sale is that the effect on the owner’s credit is typically much less negative than that of foreclosure or bankruptcy. For more information on this process, contact us. Have your questions ready we look forward to speaking with you!