Saving Your Investment through Short Sale

You cannot have mortgage without a security interest in the property, giving the lender the right for a foreclosure when you, the borrower, fails to pay the home loan. Like all homeowners, you do not want to have anything to do with a foreclosure as it can only blemish your homeowner's credit. One best way to avoid that predicament is to resort to the short sale option.


With the rising numbers of foreclosures in the country, many homeowners are now turning to short sale, which is a win-win solution for both sides as well as a good way to avoid foreclosure. Yet again, since short sale is relatively new in the real estate industry, many homeowners are having some doubts about what short sale really means, and how it can help the homeowners.


Defining Short Sale


Short sale is defined as a sale of real estate property, an special agreement between the borrower and lender, in which the lender offers to sell the property at a lesser rate than the amount owed. But it does not mean that the borrower is released from his accountability to repay the remaining balance of the mortgage.

With our recent experience of the global economic crisis, resulting to an increase of mortgage rates and a decrease of home prices, homeowners found themselves at a difficult situation wherein selling their house for a profit to pay the mortgage becomes very hard. This has also resulted to significant numbers of foreclosures.

However, it was once said that necessity is the mother of invention. This time around, we have the short sale option which proves to be highly beneficial for all concerned rather than engaging in foreclosure, which involves in hassle processes and hefty fees.

Two Types of Short Sale

1.    Deficiency judgment. Generally, all short sales have the so-called deficiency balance or the remaining balance of a home loan. This is the first type of short sale wherein you will be under obligation of the law to pay the remaining loan balance. Prior to a short sale, you and the lender should reach an agreement with regards to the deficiency balance.
2.    Payment in full. As the term suggests, this is the type of short sale wherein your remaining home loan balance is already considered paid in full without pursuit of the deficiency judgment. In short, you will no longer need to pay the deficiency balance between the laon balance and the sale cost.

Criteria for Short Sale


Although short sale a good option  than foreclosure, there are still lenders who do not want it. Or there are some cases that the borrower does not qualify for the option. Here are some of the criteria for short sale:

• A homeowner is experiencing a disaster or a death in the family resulting to the difficulty to pay the mortgage.
• A borrower has no other asset to pay the loan other than the property.
• A homeowner should make a default in loan repayment for an agreed period of time.
• The borrower will require the borrower a letter of hardship that explains the short sale option.

As implied above, short sale is a much better option to go when a homeowner is facing a financial crisis, but does not want a foreclosure. It will be best for you to hire the assistance of a short sale expert or a real estate attorney who can advice you more on this matter.