A short sale occurs when the seller owes more on their mortgages than the current market value of their property. Once the seller receives an acceptable offer from a ready, willing, and able buyer, negotiations and concessions must be made so that the lender will accept a sale at current market value as payment in full for the loan. Sometimes the homeowner in this situation may have the mortgage debt forgiven.The need for a short sale often begins with a loan default. The lender or creditors may be willing to allow the property to be sold for less than the amount owed on the mortgage and accept that short amount as full payment of the debt.
There often is a tremendous amount of stress involved in these transactions because:
1. The seller usually is in default of the mortgage and is unable to make the payments.
2. The seller may have received pre-foreclosure notices or is in foreclosure.
3. There may not be enough time to complete the short sale before the foreclosure date.
4. The buyer may cancel the sale prior to acceptance of terms by the lender.
5. A second mortgage holder may refuse to cooperate in a short sale.
6. The lender may encourage back up offers that exceed original accepted offer.
7. Seller may have no cash for repairs of the property.
8. Lender may not accept buyer’s offer that was accepted by the seller and may counter it.
9. Seller may want cash out at closing.
10. Seller may not have the debt forgiven and may cancel the sale.
The lenders loss mitigation departments are not staffed to service the large number of homeowners who are in financial trouble with their home loans. They receive thousands of requests and must review each package individually. There are numerous forms to be completed and if the package is not in order, it may be place at the bottom of the stack. As a buyer, do not be surprised if you do not receive a response for up to four months!
