What is a Short Sale

You have heard that the people around the corner have put their house on the market and are advertising it as a "Short Sale". So you ask yourself what is a Short Sale?

Basically a Short Sale is selling your house for less than what you owe and the lender has agreed to take less than the principal balance of your loan. If you have a second or even a third on your house you have to have all three agree. It only takes one to say no and you can't do a Short Sale. The lenders are now negotiating with a buyer, your only responsibility is to find a Real Estate Agency that will list your house and work with the lender.

You are short selling your property because you want or need to sell your home and you don't think you can get what you owe for it because the market has taken a huge hit and prices are falling.

Unfortunately many people bought their house with an Adjustable Mortgage Rate (ARM), starting at a very good interest rate of 3% or 4% with the interest rate jumping to 6% or higher in 3 to 5 years. They were gambling that the interest rates would drop and that the value of their home would increase, thus enabling them to refinance their home with a conventional loan at a reasonable interest rate.

They have found themselves with a payment increase of several hundred dollars per month and they can't afford it. Their house has not increased in value, in actuality it has decreased and they owe more than it is worth.

Many try to make adjustments to their life style to cover the increased payment. For awhile that works. Many communicate with the lender to try to work something out. Most of the lenders are so overwhelmed with the Short Sales and Foreclosures they don't know what to do or they don't attempt to do anything.

If the home owner is lucky he contacts a person at the mortgage company who will work with them to sell their house and is willing to take less than what is owed.

The catch is is that the home owner won't get a penny from the sale of the house! Nothing! Nada! The only people that will make money on the sale of the house will be the real estate agencies involved in selling and buying your house, the new mortgage company and of course the original lender, though he will be taking a loss because most of those fees will come out of the sale proceeds. Also making their money will be the title company, the appraiser, the pest control inspector and any others involved in selling the house.

If you have found yourself in a similar situation, don't just stop making your mortgage payment and don't walk away from it. Make the effort to see if they will work with you to lower your payments; maybe give you a new loan and a decent interest rate. Don't take no from the first person, keep calling until you find someone that can work with you.

It will be a headache, but you could save your house. Unfortunately it is a very small percentage of those that try that are successful. The old adage of the squeaky wheel gets the grease can be applied here. Keep calling. Don't give up.

Walking away from your home will hurt your credit history for at least the next seven years...or more, and make it next to impossible for you to buy another home. The mortgage industry is attempting to change laws so that if you walk away from your home you won't be able to buy a house...ever. I don't think the government will go along with it, but they could make it very difficult.

I hope you haven't found yourself in this situation. If you do, start before the payments increase and if you end up thinking you want to do a "Short Sale" you can contact me at (559) 935-2500.