What Really is a "Short Sale"?
July 6, 2010
After at least two years of dealing with short sales, it seems that many folks still are unclear about exactly what a "short sale" is. Many current listings are "short sales" and buyers want to know how a short sale might affect them.
Here is the definition of a short sale that was given in a California Association of Realtors' Q and A about short sales.
" A short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage balance amount due and accepts the proceeds as full payment of the loan. A lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender's damages....this saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on his or her credit report."
The main effect of a short sale on a buyer is the uncertainty of the approval from the lender as well as the length of time it generally takes to obtain the lender's approval.
Most short sale listings have a list price that is arrived at by the use of a comparative market analysis and is not a price already approved by the lender. For this reason, the buyer cannot be certain that the offered price will receive lender's approval. The new HAFA procedure is designed to allow a borrower to obtain an approved price prior to receiving an offer in an effort to take some of the uncertainty out of the process.
Short sales are likely to be with us for some time as the market adjusts to the new valuations resulting from the current downturn in the economy.
After at least two years of dealing with short sales, it seems that many folks still are unclear about exactly what a "short sale" is. Many current listings are "short sales" and buyers want to know how a short sale might affect them.
Here is the definition of a short sale that was given in a California Association of Realtors' Q and A about short sales.
" A short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage balance amount due and accepts the proceeds as full payment of the loan. A lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender's damages....this saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on his or her credit report."
The main effect of a short sale on a buyer is the uncertainty of the approval from the lender as well as the length of time it generally takes to obtain the lender's approval.
Most short sale listings have a list price that is arrived at by the use of a comparative market analysis and is not a price already approved by the lender. For this reason, the buyer cannot be certain that the offered price will receive lender's approval. The new HAFA procedure is designed to allow a borrower to obtain an approved price prior to receiving an offer in an effort to take some of the uncertainty out of the process.
Short sales are likely to be with us for some time as the market adjusts to the new valuations resulting from the current downturn in the economy.
posted by shirley harry at 8:15 AM
1 Comments:
A lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender's damages..
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