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News - Short sale Explained

By Jim Pendleton - MrMortgageTM

Jim Pendleton, having been bloging and answering hundreds of questions, as well as helping thousands of clients. Jim Pendleton is a person of personal integrity and someone you can trust. Being an affiliated with a Federal Chartered Bank, operating in all 50 states, doing FHA, VA USDA, construction loans, residential and commercial lending. We cover all scenarios and can help you accomplish your goals and desires.

In a short sale, a seller facing the threat of foreclosure enters into an agreement with their mortgage lender to accept a price for the property that’s less than the amount they actually owe on it. The seller makes no profit on the sale but avoids many of the problems that would come with a foreclosure.


Philosophy from an Agent Standpoint
As a business model, Short Sales can be very rewarding. It is a real estate agents way of helping both homeowners and the housing market. Simply put, if you are able to relieve the financial burden of a home that the Seller is no longer able to afford, you will have a client forever. By taking that home off the market, you will also prevent that home from going into foreclosure, thus helping sustain home prices from continuing to decline as the Short Sale process is much shorter than the foreclosure process.


Possible Advantages
With a short sale, sellers avoid having to go through a lengthy foreclosure process and prevent the impact of a foreclosure on their credit score. In a short sale, the seller and the lender work together to determine the details of the agreement, but typically sellers who complete a short sale also sometimes avoid owing the balance of the loan.
The biggest advantage to buyers is clearly the prospect of moving into a new property at a great discount. Moreover, buyers may find that short sales have an additional benefit over foreclosures too, since unlike a foreclosure, there’s not much of a risk that the buyer will need to take action to remove the seller from the property.
Of course, mortgage lenders can benefit as well. With a short sale, lenders don’t have to worry about getting involved in a long foreclosure process. More than anything else, lenders want their money back and they generally want to steer clear of taking responsibility for selling a home. So, a short sale can actually be good for them.


Potential Pitfalls
Sellers considering a short sale must understand a few important things. First, not all lenders will offer to relieve the seller of the responsibility of paying off the balance of the loan. So, sellers should get a solid commitment from lenders that states this is part of the deal. Also, though the seller is avoiding a foreclosure, even a short sale will affect their credit score. So, sellers should discuss this issue with their lender to figure out how the process will be reported to the credit agencies.
 

 

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