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Tuesday, November 1, 2011

What is a Short Sale? Why do it?

A Short Sale is when the lender of record agrees to discount their payoff on the sale of a house when:

The borrower has experienced hardship and is unable to repay the mortgage.
The value is proven to be less than the amount needed to pay off all loans, encumbrances and real estate selling costs.
The loan is delinquent or in default.

Often a house in which the proceeds of a sale will fall short of what the home owner still owes on the mortgage, lenders will accept the lesser proceeds as a short sale. By doing this the lender forgives the balance of the mortgage and thereby avoids a lengthy and costly foreclosure procedure.
How do Sellers Benefit from a Short Sale?

The seller can avoid having a “foreclosure” on their credit report. Most lenders tend to report “settled” upon successful closing of a short sale.
Assuming the seller is already not making mortgage payments, they can continue to live in the property and not make payments during the lengthy short sales

Most sellers feel it is the “right thing to do” when in default. They tend to feel that walking away from the house is irresponsible. It’s a respectable option

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