What is a Short Sale
Short Sale Help RI, MA
- A short sale is where a lending Institution or Bank will accept less than what is owed on the mortgage as a “short” payoff.
- As the Real Estate Market continues to decline, more and more homeowners find themselves owing more than what their properties are worth, AND are in a situation where they can no longer afford to pay the mortgage or are being forced to relocate do to work related circumstances.
- For these reasons, “Short Sales” are becoming evermore popular with Banks as an alternative to the costly and time-consuming Foreclosure process!
Why would a Homeowner do a Short Sale
- To avoid the long lasting and damaging effects that being foreclosed on will have on your credit.
- In a “foreclosure” situation the foreclosing Bank suffers a much larger loss on their mortgage. In some states like Rhode Island and Massachusetts the Bank has the right to sue the homeowner for the deficiency balance, which in many cases forces the homeowner into Bankruptcy.
- When a homeowner opts to do a short sale instead of walking away from their obligation, they are “in essence” helping the bank recover as much of the banks money as possible by selling the property for current market value. In return, the Bank is less likely to come after the homeowner for the deficiency and in most cases the entire debt is forgiven.
- A seller would be able to purchase a new home much sooner after a short sale versus a foreclosure.
- Seller can generally remain in the property up until the closing date.
Why would my Lender accept a Short Sale?
- Banks and their share holders do not like excess inventory on their books, therefore if they see an opportunity where they can get rid of the property without the huge loss incurred after a foreclosure, most of the time they will take it.
- Bank Losses on prime loans going through the foreclosure process averaged 49 percent versus 34 percent for a short sale as of Oct. 1 2009.
- Lenders have pressure, on a federal level, to get the properties out of their portfolio since it affects their ability to sell loans on the secondary market.
- A market saturated with foreclosures can cost lenders billions -- and as much as $50,000 per foreclosure -- according to a study by the congressional Joint Economic Committee.
- So contrary to popular belief, your bank does not want to own your home.
- The above are just a few of the many reasons why a Lender would accept a Short Sale.
For More Information please feel free to contact our Short Sale Team
Short Sale Dept.
Law Office of Glenn J. Andreoni
640 George Washington Hwy
Lincoln, RI 02865