Real Estate Short Sales:
What is a Short Sale:
A short sale is the process of selling a home where the amount gained from the sale falls short or below the balance owed on the property. This process has been put in place to assist those that are currently experiencing an economic hardship that has impacted their ability to make payments on their home. A short sale is handled through the mortgage lender's loss mitigation department and is used as an option to prevent the home from going into foreclosure. In the case of a short sale, the lender has the option of allowing the homeowner to walk away free and clear of any debts to the property. However, it is also possible that the lender will hold the borrower accountable for any negative amortization or loan deficiencies. The process of a short sale is very detailed, and therefore it is highly recommended that you consult or work with a realtor who is extremely familiar with the how they work.Types of Short Sales:
There are two types of short sales: Payment in Full and Deficiency Judgment.
The Payment in Full option is where the borrower hands over the deed of the property to the mortgage lender, and in exchange the mortgage lender forgives any debt on the borrows behalf.
Deficiency Judgment is a judgment that is against the borrower when the proceeds from the sale do not cover the balance owed on the property and the borrower is expected to repay the outstanding amount.
Credit Impacts:
If the short sale results in a Deficiency Judgment, the borrower's credit will most likely be impacted until the unpaid or remaining amount is paid in full. However, there is still a chance that this can remain on the borrow's credit for up to seven years.