Short Sales Explained

What’s a Short Sale?

A short sale occurs when a property is sold for less than the amount owed on the mortgage and the lender agrees to accept that amount as satisfaction of the total amount owed to pay off the home loan (including other transaction-related expenses such as closing costs, property taxes, transfer tax, and/or commission fees).

The lender determines if the seller is eligible to sell the home at less than the outstanding debt due to a hardship. The lender then accepts that shortfall as their loss. Simply owing more than the home is worth is not necessarily a hardship. Hardships include divorce, unexpected hospitalization and medical expenses, job loss, death of a family member or a similar catastrophic situation. Additionally, a budget must show that the seller’s expenses exceed their income/assets, they are behind on their payments and there is no way to repay the lender.

The risk with short sales is that a home may be listed as a short sale, however when you get to closing, the lender may decide not to accept the home as a short sale. There are no guarantees in short sales.

Be aware that lenders also can change any of the terms of the contract that has already been negotiated, which may not be agreeable to the you.

Here are the topics covered in the “Short Sale Seller Advisory:

Understand a Lender’s Options upon Loan Default
Be Aware of Predatory “Rescue” Scams & Short Sale Fraud
Contact a free HUD-approved housing counselor or contact your lender directly
Utilize free services available to Arizona residents
Obtain Legal Advice
Obtain Tax Advice
Be aware of the Consequences of Committing “Waste”
Consider All Options such as:  loan workout, loan modification, refinance, deed in lieu of foreclosure, work out sale, bankruptcy and foreclosure
Contact a qualified real estate professional
Investigate documentation and eligibility
Determine the amount owed on the property
Determine the estimated fair market value of the property
Consult legal counsel
Understand that a short sale may not discharge the debt
Be aware of the impact on your credit score
Understand that there may be a waiting period before you can buy another home
Review the Arizona Association of REALTORS® (AAR) short sale forms