Knowledge Center

What is a Short Sale?

A short sale is when a mortgage lender or lenders agree to accept less than the total amount of money they are owed on a piece of property in order to facilitate the sale of the property. This is done when the owners of a property have fallen behind on their mortgage payments and a foreclosure on the property is imminent.

What qualifies a property for a Short Sale?

The owners of the property must be able to show they are in a negative cash flow situation and are about to go 30 days behind on their mortgage payments and will be facing a potential foreclosure action in the near future.

The owners of the property must show a financial inability to get caught up with their payments and an inability to continue making payments in the foreseeable future. Proof of a recent financial hardship is helpful in making this determination.

The property must currently be valued on the open market for less than what the owners owe their mortgage lenders. This valuation is done by a licensed appraiser hired by the lender who is familiar with the particular market the property resides in and is commonly called a BPO (Brokers Price Opinion).

Why would a mortgage lender agree to take less money than they are owed?

Foreclosures are a very expensive and time consuming legal action for mortgage lenders. Once the legal fees are paid and the legal part of the foreclosure process is complete the lender then needs to sell the property to try and recoup their money. This involves the same costs to the Bank as the property owner would have been facing if they tried to sell the property on their own such as repair costs, marketing costs, Realtor costs, Appraiser costs, Attorney fees, Title fees, taxes, etc. In today’s declining real estate market there is a very good chance the lenders will still end up selling the property for less money than they were owed except now they have incurred all of these additional expenses of foreclosing as well as all of the carrying costs on the property like real estate taxes and utility bills while the property sat vacant with no money coming in. This is why a properly submitted and documented short sale offer can be very appealing to a lender.

How long does the Short Sale process usually take?

The answer to this question is, as long as the lenders need to make an informed decision. This varies not only from lender to lender but from loss mitigation agent to loss mitigation agent within each lender. Like all aspects of business, some people just work faster than others. In general, however, you can expect an answer on a short sale contract submitted to a lender within 30 – 45 days from the date they receive the short sale offer.

Will the lender(s) stop all foreclosure actions while the short sale contract is being reviewed?

Normally they will. If the lender feels the offer is genuine then they will grant a 30 day extension if a foreclosure sale is imminent. Current pending legislation in Congress will require lenders to grant 90 day extensions on foreclosure actions to give homeowners a chance to work out a solution and avoid foreclosure.

What if the short sale offer is rejected?

Lenders do not normally refuse outright to accept a short sale. However they may propose a counter-offer to the one which was submitted requiring either the property to be sold for more money or for certain expenses incurred at the closing to be reduced. This is when the negotiation process goes into high gear as all parties must now find some common ground or face foreclosure. The only time a short sale offer is normally rejected in it’s entirety is when the offer is extremely low and the investor’s insurance on the loan will pay the investor more than they would recoup through a short sale.

Why should I use your service over someone else?

Our company is made up of Real Estate Attorney’s, Mortgage Brokers, Title Agents and Licensed Realtors with dozens of years of experience in negotiating not only short sale contracts but distressed property buyouts of all types. We have developed personal relationships with many of the loss mitigation agents working for the lenders. They know us and they know when we submit a short sale offer it is going to be accurate, complete and genuine. We make our offers very easy for the loss mitigation agents to process and in turn our offers get looked at first.

Our policy of not taking any money up front puts everyone involved at ease because they know we are not just looking to collect a fee and ignore the file afterwards. We have negotiated short sale offers for some of the largest real estate developers in the country and on properties valued at over 9 million dollars. Experience makes the difference between a successful short sale negotiation and a long, drawn out process where everyone suffers. Our experience in negotiating with lenders and in the real estate industry for the past 18 years puts us at the top and is why our company should be the one you want working on your files.

Additional Questions

If you have ANY other questions about short sales, short sale investing, foreclosures or any aspect of real estate, please feel free to call us at 888-SHORT-50. Consultations, like our negotiation service, are always free and one of our attorney’s or negotiators will be happy to help you with any problems, questions or investment situations you may have.

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