What is a Short Sale?

WHAT IS A SHORT SALE?  A "short Sale" or "negotiated settlement" or "short pay" occurs when a Lender agrees to accept less than the amount owed to pay off a loan as an alternative to foreclosure.  If the property is worth less than the amount owed on the loan, then even if the Lender does foreclose and takes back the property, they know that they are going to have to take a loss (significant loss in some cases).  Through our experiences and vast resources, we can often convince the Lender that it will be in their best interest to take less than what is owed now rather than taking the property back through foreclosure and trying to sell it themselves later.

HOW LONG WILL IT TAKE?  The short sale negotiation process can be a lengthy one.  It may take several weeks or possibly several months to get an approval.  Many Lenders have several layers of bureaucracy, insurers, and investors that we will have to maneuver through in order to get a short sale approved.  It is important to remain patient during this process.  We wil say that experience and knowledge counts a great deal when it comes to successfully negotiating a short sale and our marketing efforts along with legal resources can greatly expedite the process and achieve a successful result.

BUT MY HOUSE IS GOING TO FORECLOSURE, WILL I HAVE ENOUGH TIME?  Probably, but maybe not.  Just starting a short sale will not automatically stop a foreclosure.  However, in many cases we can successfully convince a Lender to stop the foreclosure to let us attempt to negotiate the short sale.  In general, Lenders are in no hurry to take back a property and thus are open to letting us professionally represent and market a short sale to secure a buyer.  So, while there are no guarantees, it does not hurt to try and often the Lender will cooperate with the short sale process as long the property is aggressively being marketed and all documentation is well organized.

CAN I STAY IN THE HOUSE?  The key word in "short sale" is sale.  The purpose of the short sale is to get the property sold.  So you will be moving once the property is sold.  Short sale is not a program that can stop a foreclosure and allow you to keep the house indefinitely.  Often sellers do reside in the home during the short sale process but vacating the home can make the process easier to sell.

HOW DO I KNOW THIS WILL WORK?  Unfortunately you don't.  We cannot and must not make any promises that this is guaranteed to avoid foreclosure.  Once you have missed a payment, the Lender is in charge and can proceed to foreclosure if they want to.  However, we know they do not usually want to and we are very good at presenting alternatives to the Lender that they often want to accept rather than foreclosure.  We are very good at what we do and are often successful in negotiating the short sale, but no promises will ever be made as to whether or not the Lender will accept a short sale. 

WILL I GET ANY MONEY FROM THE SALE?  The short answer is No.  A universal requirement of Lenders in granting a short sale is that the borrower will not get any proceeds from the sale of the property.  If the Lender is going to take a loss on the loan then they will not let the borrow receive any proceeds at closing.

WHAT HAPPENS IF THE DOESN'T WORK?  The property will most likely go into foreclosure and the Lender will have taken it back.  A short sale is something we try after all other options have been exhausted.  However, as previously mentioned, most Lenders do not desire to foreclose on the property and will cooperate with the short sale marketing as long as the property is aggressively marketed and all documentation is well organized.

WHAT IS A "RELEASE"?  A Lender may offer to "release" its security interest against the property in exchange for less than the total amount of the note.  A release will allow the property to be sold without paying off the obligations of the note.  However, this note is not satisfied.  Advantages: This successful short sale will allow the property to be sold and thus avoid a foreclosure.  Disadvantages: The remaining debt on the property (sometimes called a "deficiency") still exists.  You are still liable for the note - in other words - you still owe the money.  Reality: Though the Lender as the right to, it is not likely that they will pursue the deficiency unless you have other significant assets, and if you do not try a short sale and the property goes to foreclosure, you are going to have a deficiency regardless.

WHAT IS A "SATISFACTION"?  A Lender may agree to accept less than it is owed as complete and total satisfaction of the note and release its lien against the property.  Advantage:  Your note and obligation to the Lender are satisfied for less than you owe.  When the property is sold, the debt is paid off completely.  Disadvantages:  You may have some tax consequences that you should discuss with your tax advisor due to the fact that the Lender is forgiving debt and is sometimes considered under the eyes of the government as income which is taxable.  New laws have recently been passed which may exclude you from paying taxes on the forgiven debt and each situation needs to be discussed and confirmed with your tax advisor to determine if you would qualify.  We strive to successfully obtain a satisfaction from the Lender but sometimes all we can achieve is a release.

HOW CAN WE HELP?  It goes without saying that Stirling Sotheby's International Realty is one of the most recognized and respected real estate marketing firm in Central Florida.  As Top Producers within Stirling Sotheby's, we are experts at successfully employing dynamic marketing strategies to promote and sell our listings.  Our global outreach is unparallel and we can bring all of our marketing resources to bare in representing your property.  When it comes to managing the short sale process, the Lender will require a review of a financial package that usually includes two months bank statements, two months pay stubs, two years IRS tax returns and other information.  The leading cause of delay and even denial of an offer to the Lender is caused by the Seller failing to deliver these items in a timely and organized manner.  To help us succeed, you would have to find as much of this information as you can right now and complete a "Financial Worksheet" which we can provide.  This will help us work faster and increase our success. 

Please never hesitate to contact us with questions regarding your real estate needs.  As in most situations, timing is everything and if you are facing the possibility of foreclosure or if you feel you would be a candidate for a short sale, then the time to act is now!  We will begin to immediately communicate with your Lender and start the process which hopefully can bring some piece and stability back into your life.  We understand your situation, the confusion and stress one can experience during this process.  Let us help you today by employing our vast resources which can greatly increase the chances of avoiding foreclosure.

Short Sale Approval Program From Fannie Mae