Short Sales

"Short Sale" Definition

A "short sale" in residential real estate is an attempt by the owner of a home (the borrower) to avoid foreclosure by negotiating with the lienholder (the lender), to pay less than the unpaid balance of the loan (the mortgage) in complete satisfaction (payoff) of the loan. More often than not, the offered payoff is less than the market value of the home.

Obstacles

It takes two to dance, that is, the lender must agree and consent to a short sale. The lender is under absolutely no obligation to even consider the proposal. And actually communicating with someone representing the lender who can accept or reject or negociate a short sale offer may realistically take an unwieldy amount of time. A short sale becomes even more complicated if there are two or more unpaid liens (and lenders) which burden the title to the home.

The Lender's Perspective

From a lender's perspective, short sales are risky, period. When facing foreclosure, it may be worth a try to run a short sale proposal by your lender - but don't expect a warm reception. However, federal regulators may soon propose new rules which may make simpler the short sale process. Whether or not the lending industry warms up to the short sale process and any new regulations is unknown at this writing.