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Real Estate Short Sales

March 23, 2009

A short sale occurs when a lender agrees to discount the loan payoff amount to allow a sale of real property at an amount that is short of the full loan payoff amount.  Lenders do allow short sales when:

  • The market value of a home or condominium is less than the loan amount.
  • When a home owner is can no longer afford to may regular payments due to financial hardship.
  • When the home owner has no other assets from which monies could be used to make payment. 

In order to enter into a short sale arrangement a home owner will need to:

  • Sign a marketing agreement with a Realtor who is knowledgeable in the short sale process.
  • Complete a hardship letter outlining the circumstance that have lead to the current financial hardship necessitating sale of the property such as job loss, loss of income, divorce or poor health.
  • Prepare a financial statement and copies of recent tax return that confirm financial hardship.
  • Submit marketing agreement, hardship letter, financial statements and any offers to the lender’s “work-out” department for approval.

The lender will order a BPO (Broker Price Opinion) on the property to determine market value.  If an offer is made by a qualified buyer at or near the BPO value the lender may approve a short sale.  I short sale will affect a borrower’s credit score far less than a foreclosure.  In most cases a seller who completes a short sale who maintains good credit will be in a position to repurchase a home within a year.  After foreclosure it may take as many as seven years.   If you purchased your home in the past few years selling short and buying at today’s new low prices may be a very wise financial move.

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