Sale of a Property, with Approval of Creditors, for Less Than What is Owed
A short sale is the sale of a property,
with the authorization of the creditors, for
less than what is owed on it. Short sales
done all the time. Whether it is the
forgiveness of debt owed by a nation or an
individual, it simply means that someone is
willing to settle for less than what they
originally anticipated. It's part of
business. All lenders know that they will
not win all the time. Risk and loss of
capital is an anticipated cost in the
lending industry. Changing economic
conditions, conflicts, and Mother Nature are
among some of the many causes of unforeseen
situations that turn good lending contracts
into bad. In the context of
secured assets, a short sale occurs when
debtors agree to settle their liens for a
known amount of money as opposed to taking a
chance at auction. Auction prices are often
unpredictable and usually greatly
discounted. Many lenders are willing to
mitigate further risk of loss by making
deals before auction. Bad debt is sold by
lenders all the time. For instance, there is
a huge market for unsecured credit card debt
that is sold for pennies on the dollar to
collection agencies. That's self-effectuated
short sales. Lenders are more than happy to
discuss resolution of aged debt. Their
business is to lend capital, not dispose of
I discovered an excellent
Create a Short Sale
- In a Short Sale, a property is sold and
the lenders get paid less than the full
amount owed on the loans, i.e. the payment
is "short". This is an important alternative
to foreclosure because the sellers move with
dignity with less damage to their credit,
the buyers get a house in better condition,
the neighborhood avoids a vacant,
vandalized, foreclosed house and the bank
makes on average 30% more money.
HOW CAN EVERYONE WIN?
Bad feelings are often associated with
respect to people making money over the
misfortune of others. There are countless
scams in the finance industry that prey on
vulnerable people. These scammers rush in
and get out quickly. They don't build long
term viable businesses that are good for a
community. Contrary to what many think,
there does not have to be a big loser in
order to make money in the foreclosure
business. It is a matter of choice. A
valuable service can be provided that
benefits both the property owner and
lenders. People with predator mentality do
not last long in this business. Oscar's
teaching is about being rewarded for helping
others, not about taking advantage of people
Undoubtedly, the issues leading up to
foreclosure are stressful and potentially
volatile for all parties. Unforeseen
underlying problems often exist. A
professional in the foreclosure business
mediates a settlement that all parties can
move on. In a short sale, the lender has
agreed to settle the matter without further
claims, and the property owner clears their
obligations without the lingering negative
effects of a foreclosure and subsequent
garnishment of additional monies that
auction did not bring. The professional will
be thanked by all of the parties involved.
Most importantly, the professional will earn
a good financial reward.
SALES LEARN THE ART OF
PRE-FORECLOSURE DEAL MAKING
America is over-mortgaged and is
willing to pay you for your help.
That's right, thru short sales you
can make decent income by helping
others out of impending foreclosure
and financial ruin. Foreclosure and
bankruptcy destroy lives and put
mortgage capital in jeopardy. Debt
holders are often willing to
mitigate risk by agreeing to
substantial discounts if the right
person can structure the right deal.
YOU CAN BE THAT PERSON!
We know the techniques to
securing pre-foreclosure real estate
deals that create win-win situations
for everyone. - It's amazing when
you think about it, with some good
old fashioned work and strategic
knowledge of the pre-foreclosure
process, you can make good money!
This is not another smoke and
mirrors get-rich-quick scheme. It's
an honest and forthright way to make
money providing a valuable service.
Whether you are a first time buyer,
or investor, you can greatly
increase your earning power and
service-offering with this critical
information on how the lending
system REALLY works.
In the last several years,
lenders aggressively competed by
offering low rates and high
debt-to-equity ratios. Not all loans
were sound business decisions. They
know it, and you know it. When
property owners find themselves in
financial trouble where they can no
longer keep up with escalating
payments, the lenders are often left
with under-collateralized loans.
Most lenders are not in the real
estate business and need to find
ways to convert property back to
capital. The second, and third
mortgage holders are at greater risk
when a property goes into
foreclosure. - they often get
nothing after a property is sold on
the auction block for less than
market value at the discretion of
the first mortgage holder.
We can show you how to recognize
the right deals. You can help others
while not inheriting their financial
problems. You will be getting thank
you letters from the property owners
you help for saving them from
financial ruin, while you make
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.
In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.
A short sale typically is executed to prevent a home
foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a
bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a
Broker Price Opinion BPO (also known as a Broker Opinion of Value (BOV)) or through a valuation of an
appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.
Lenders have a department (typically called "loss mitigation") that processes potential short sale transactions. Today, lenders may accept short sale offers or requests for short sales even if a
Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This is great news for borrowers who are "under-water" or in other words those who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure because of this.
Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator's approval. Multiple levels of approvals and conditions are very common with short sales. Junior liens - such as second mortgages,
HELOC lenders, and
HOA (special assessment liens) - may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even when unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required
mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of
real estate transaction which is why unfortunately short sale deals have a high failure rate and often do not close on time to save homeowners from foreclosure when they are not handled by a knowledgeable and experienced professional. The best sources of knowledge and expertise in short sales are short sale negotiators,
loss mitigation specialists, and
real estate lawyers who specialize in short sale.
One thing a buyer should know about a short sale is there is no necessary commitment by the bank to sell the house. When the bank completes a short sale they have to write off the difference between their loan amount and the lesser proceeds from the escrow, something they wish to avoid. You may go through all the paperwork to make an offer on the house, pay for
inspections, and put down a
deposit to start the sale process. After you have made your offer, the bank may try to convince the
seller to refinance their loan and stay in the house, which avoids the bank having to take the write off. Any short sale contract includes a contingency where the bank must approve the sale. If the bank persuades the seller to refinance the house, the bank doesn't approve the short sale and the buyer gets their deposit back. In this situation the bank has tied up several months of the buyers time and now the buyer must start the buying process over again. So if you have a fixed time period to get in a specific city or
neighborhood you may be better off with a
foreclosure (the bank formally took possession of the property) or a situation where the seller has equity. So in a short sale situation look for clues like has the seller moved out (revealed they have no intention of staying in the property) and/or grill the
selling Realtor about how much the selling bank has agreed to sell the house at (the price you want to offer).
A short sale does adversely affect a person's
credit report, though the negative impact is typically less than a foreclosure. Short sales are a type of settlement. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information it is typically possible to obtain another mortgage 1-3 years after a short sale.
While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.
- Mortgage Forgiveness
- Debt Relief Act of 2007 - U. S. legislation affecting short sales of residential property.
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