Short Sale

WHAT IS A  SHORT SALE?

Perhaps you have heard the words short sale but aren’t sure what it is.

A short sale occurs when a home is worth less than is owed on the mortgage loans, plus closing costs such as commissions, escrow, title, etc.  When this happens, the seller may ask the bank to accept less than it is owed upon the sale of the house.  The term “short” comes from the difference between the net proceeds from the sale and the amount owed to the bank.  This is “shorting” the bank.

HOW DO YOU QUALIFY FOR A SHORT SALE?

  1. Hardship – the borrower/owner must have experienced a material change from the day the loan was received.
  • Job loss
  • Too much debt
  • Death
  • Divorce
  • Change in mortgage payment

Wanting to walk away from an Orange County, CA home that is upside down is not considered a hardship.

2.  Monthly short fall

  • Bank wants to see the borrower is having a very difficult time making the mortgage and other expenses each month.
  • If you have a lot of money left over, the bank’s are unlikely to consider a short sale.
  • You will need to complete a financial worksheet to determine this.

3.  Insolvency

  • Occurs when debts and liablities exceed all assets.
  • Borrower doesn’t have liquid funds to pay down the mortgage.
  • Banks may choose not to use retirement accounts when considering this.

WHY WOULD A BANK AGREE TO “SHORT SALE” AN ORANGE COUNTY, CA HOME?

If a person qualifies for a short sale and is facing foreclosure, the bank may choose to accept a short sale for basic business reasons.

  • They may net more money from a short sale than a foreclosure.
  • If the short sale is completed, the bank may not have a non-performing asset on its books for as long.
  • The property is likely to be in better condition than if it were a foreclosure because the seller is more likely to take care of the property while attempting to sell it as a short sale.

We know what your options are when you owe more on your home than it’s worth and don’t know what to do, and we will share it with you.

Please contact us at 714.319.9751 to schedule a free consultation to discuss your options.