Who? : Sellers who are upside down on their mortgage. Buyers looking for a great deal.
What? : A Sale of a house or property that is for less than the amount owed to the bank/lender.
Why? : A Seller might choose to try to sell their house in a short sale in an attempt to salvage their credit. Most homeowners in distress want to own a home again. Fannie Mae
and Freddie Mac will accept borrowers who have gone through a short sale 2 years after versus 5 years after a foreclosure.
A buyer might want to purchase a short sale because they will be afforded the same buyer's inspection rights as a standard sale while getting the same pricing as a foreclosure. Additionally, there is less of a chance that they will be "trashed out".
The drawback can be that it can take a LOOONG TIME! Short sale is definitely a misnomer.
Where? The offer after being accepted by the seller is then forward to the lender (along with piles of supporting documentation) for them to review. This is commonly called the loss mitigation department.
How? This is a complicated question. The how is what takes so long! A seller accepts an offer on their property and they present this offer to the lender. The lender determines what the property is worth and either, accepts, counters or denies the offer. They are likely doing this on behalf of the holder of a mortgage backed security (holder of the note). When the offer is accepted by the lender, the sale can close escrow and the loan comes up on the Seller's credit as satisfied. This is not as good as "paid in full" but better than a foreclosure. Previously, the lender would try to issue a 1099 to the seller for the short amount, but now this can be waived.
More Questions about short sales? Call me at 707-616-3456 or email at andy@azalearealty.com
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