Short Sale Basics: The Initial Process

: Chris Lee Law Firm

  Filed under: Short Sales

Many people are all too familiar with the words “short sale” in today’s housing market. These properties have been a significant portion of all home sales since the bubble burst years ago, and that trend has continued even while the market is showing signs of beginning to recover. Still, it is always good to be well-versed in the basics, so here is a simple rundown of a typical short sale process.

Short Sale Avoids Foreclosure

A short sale can occur when a borrower owes more on their mortgage than the current value of their home, a problem that has cropped up with regularity since the housing market downturn in the mid-2000s. Faced with foreclosure, either the borrower or the lender will offer this type of sale as an alternative. Essentially, the home will sell at its current market value, and the lender will accept that lump sum as payment of the current mortgage, freeing the current borrower from debt and allowing them a fresh start without the burdens of foreclosure. At its best, a short sale can be a beneficial proposition for both parties, allowing the lender to get back a healthy portion of the loan without resorting to costly foreclosure proceedings, while allowing the borrower the chance to escape from a crushing debt that they incurred through no specific fault of their own other than buying at a bad time.

In order to effectively petition for a short sale of your home, you should move quickly. Once a home mortgage goes into default, lenders are quick on the draw in terms of moving to foreclosure proceedings these days. Be sure to get a foreclosure lawyer involved and bring up the possibility of a short sale early in the pre-foreclosure process to ensure that it is on the table.

Another benefit is that it causes less damage to your credit score than foreclosure would. Depending on how the transaction is reported to the credit bureaus by the lender, a short sale may have a small adverse impact or even none at all.

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