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Definition

A Short Sale is when the amount realized from the sale of a property is less (short) than the amount owed including outstanding liens, such as property taxes and homeowner association dues and closing costs. In most cases the banks will pay all closing costs including real estate commissions. Short Sales are like finger prints. "No Two are Identical", and because of this outcomes will greatly vary.

Many factors are weighed by the banks and the types of loans you have will most likely play a large role in how the banks approval letters will look. ALL LIENS must be released before the sale can proceed. This includes the Bank Liens, Mechanics Liens, Judgments or any other type of Liens.

Short Sale Example

You sell your home for a sales price of $500,000.00, less than what is owed on the 1st mortgage ($600,000), and 2nd mortgage ($125,000), outstanding real estate taxes ($10,000), HOA dues and penalties if applicable ($1000) and the closing costs associated with the sale ($35,000). These closing costs typically include escrow settlement, title insurance, demand processing, and natural hazard report.

The property will now be a short pay by $271,000 based on the sales price less the mortgages, taxes, HOA and closing costs.

• Sale Price $500,000.00
• 1st Mortgage $600,000.00
• 2nd Mortgage $125,000.00
• Property Taxes $10,000.00
• HOA Dues and Penalties $1,000.00
• Closing Costs $32,000.00
• 1st contribution to 2nd $3,000.00
• SHORTFALL $271,000.00

The short sale process is similar to a regular home sale in that you are selling your home to a buyer who is purchasing your home with much of the typical sale processes being followed.

The main difference is that the lender(s) or lien holder(s) must approve the sale as it is for less than the amount owed. An experienced Broker/Agent can negotiate with the lender(s) or lien holder(s) on how much they are willing to accept, allowing the house to be sold, reducing losses and saving credit. If you have multiple mortgages, then more than one settlement may need to be negotiated. The above example is slightly higher than the average amount of deficiency we are seeing right now. The average deficiencies for our company is at approximately $200,000.00. We have negotiated short sales with an excess of 500,000.00 in short fall.

Nothing can replace the peace of mind you will have knowing that a true professional that is highly experienced in short sales is preparing the short sale package, collateral and mitigation, on your behalf for the lender(s) and or lien holder(s) along with the ability to contact and negotiate directly with the banks. This is not only a huge stress relief for you but essential to our success.

See also: Frequently Asked Questions