Short Sale Primer – Part 1

A short sale is a sale in which the net proceeds are not sufficient to cover the seller’s debts. For example

Sales Price $800,000
First Loan $700,000
Second Loan $200,000
Closing Costs $56,000

Loss to Bank $156,000 ($800k – $700k – $200k – $56k) Also, there could be additional fees such as delinquent interest on loans, delinquent property taxes, etc.

Any time the bank is going to take a loss on the sale of your home, they need to approve the sale. If they do approve the sale (a complicated process that can take 4-6 weeks), the sale will go through and the loan will be closed. Your credit will suffer, but not as bad as in a foreclosure. If the bank rejects the short sale, your most likely option (unless you land a great raise, win the lottery or have your financial situation otherwise change for the positive), is a foreclosure.

It is important to note that the bank doesn’t want to foreclose on your home. It is expensive and they often have to sell the home for less than they could have received in a short sale. So, if you can document your case sufficiently and have a reasonable offer, in most cases, the short sale will be approved.

Foreclosure, Short Sale