As the foreclosure crisis drags on, short sales are becoming increasingly common. Unlike foreclosure—in which the bank seizes a property from the homeowner in lieu of mortgage repayment—short sales entail receiving permission from a lender to sell an underwater property for less than the amount owed on the mortgage.
While short sales are generally considered to be less expensive for the bank, and better for the homeowner’s overall credit rating, than foreclosure, they can still be extremely complex.
Pre-Approved Short Sales
The “pre-approved” designation can be very misleading for homeowners. It is usually intended to designate a short sale that will, theoretically, be closed quickly. However, expecting a quick closing can be unrealistic, at best.
Also, pre-approvals exist under the federal government’s Home Affordable Foreclosure Alternatives (HAFA) program. These are designed to allow homeowners to receive move-out funds at closing.
These two are the only actual examples of pre-approved short sales. In all other cases, short sales offers are all negotiated individually from beginning to end, with no basis in any prior offers.
In some cases, lenders will attempt to entice borrowers with incentives to complete a short sale. While these incentives may seem tempting, some consideration is still necessary. Borrowers should look closely at any such offers to determine if there are any hidden requirements or tax implications.
Borrowers should research any offers thoroughly and ensure that the lender has provided them with all the details, as they relate to their specific circumstances. Though in many cases these incentives are legitimate, and can be beneficial, it is important to explore the situation thoroughly to look for any adverse consequences.