The Long Story behind the Short Sales

Short sales in real estate is a sale of the property wherein the proceeds fall short of the balance the owner (or borrower) of the property has to pay the lender. This often occurs in situations where the borrower could not the amount he borrowed from the lender and the lender agreed to sell the property even at the price lower than what is owed to the lender. Both parties must agree to the short sale process before actually proceeding to have them. However, this does not warrant the borrower of being free from any obligations to pay the remaining amount to the lender. He still has to pay the remaining balance of the loan after the short sale.



If you are the lender you should know that when lenders agree to do a short sale it means you are accepting less than what is due. Not all lenders agree to short sales especially when it is better to foreclose the property and not all properties can be qualified to short sale. If you are the buyer or has intention to buy short sale property it is wise to have some legal advice from a lawyer whose expertise is on real estate and an accountant to clarify anything regarding short sale tax ramification. If you are the borrower, it is best to consult with a lawyer and an accountant first to see if it is wise to engage in short sale.



There is no guarantee that the lender will accept the short sale revenues as full payment for the loan of the borrower. The lender has still the right to demand remaining payment from the borrower. In some state the difference between the borrowed amount and the actual amount paid is known as deficiency. The lawyer can determine if your loan can fall under deficiency judgment (which is a complicated process to understand that is why it is advisable to seek a lawyer first before jumping in) or claim.



Short sales may be the best solution at a glance but there are actually several things to consider. Different lenders have different requirements and may require you to submit various documents. It is wise to phone the lender. Try to make lots of phone calls until you can able to trace the person that is responsible for handling short sales. You are looking for the person’s name that is capable of making a decision (could be a supervisor or manager). You may be asked to give authorization letter to parties involved.



Knowing what you are going to venture in will give you some ease and some wise decision making before it’s too late. Remember that if there are legal matters involved, try to ask the lawyer as the best source of advice.