A short sale is a real estate transaction where the sale proceeds are insufficient to cover the mortgage balance, requiring lender approval to release the lien. Lenders may agree to a short sale to minimize losses compared to foreclosure, especially if the seller demonstrates financial distress. Sellers benefit from a short sale through reduced credit impact, potential financial incentives, and a faster selling process, though they may face tax consequences and deficiency judgments depending on lender agreements.

1. Helping You To Preserve Your CreditJohn L. Dumas, Realty Source San DiegoA Guide To Understanding The Process

2. Helping You To Preserve Your Credit What Is A Short Sale? It’s a transaction where two unique events must occur together.(1) Net Proceeds Sale Loss A short sale occurs when your net proceeds from the sale is insufficient to cover your note balance(s). (2) Lender Agreement The lender(s) agrees to release its mortgage lien(s) and note obligations on the home in exchange for payment less than the full loan balance.

3. Helping You To Preserve Your Credit Why Would A Lender Agree To A Short Sale? (1) Lender Loses Less As Compared To A Foreclosure The discounted payoff of the short sale must be less than the lender’s cost to foreclose. Legal fees on foreclosure

4. Title closing of property

5. Holding of property until a successful resale

6. Maintenance of property until a successful resale

7. Commission & marketing cost of resale

8. Helping You To Preserve Your Credit Why Would A Lender Agree To A Short Sale? (2) Seller Distress The lender will agree to a short sale if the seller can prove distress. Seller is in default on mortgage

9. Seller can document financial distress

10. Seller has a firm sale which generates insufficient proceeds

11. Seller sale provides no net to seller

12. Seller proves current market comparables support sale price

13. Helping You To Preserve Your Credit Why Would A Seller Want To Do A Short Sale? Potential Seller BenefitsThe Government recently passed HAFA (Home Affordable Foreclosure Alternatives) that is a Godsend for homeowners underwater.With HAFA, the Government requires homeowners are released from their debt, and any future liability from their Lender.Financial Incentives are provided: $1500 for you, $1000 for the Lenders, and up to $3000 for any additional lien holders.The process has been streamlined, and is MUCH faster now than ever before.

14. Helping You To Preserve Your Credit Why Would A Seller Agree To A Short Sale? Continued…..5. It has less of an impact on your credit rating than a Foreclosure or Deed-In-Lieu of foreclosure. 6. Your lender may stop reporting missed payments to credit agencies.7. Provides more time for you to act in this difficult situation.8. You may buy another home sooner as compared to a foreclosure.

15. Helping You To Preserve Your Credit What Must A Seller Do To Prepare For A Short Sale? The following is a checklist of what you need to gather to begin the process of a Short Sale. Hardship letter

16. Appraisal

17. Deed