What is a Short Sale?
A Short Sale occurs when a Lender approves the sale of a property for less than the amount that is owed on a mortgage or mortgages. The name, Short Sale, comes from the fact that the Lender’s payoff is coming up “short”. In fact, the lender will also be paying the real estate commissions and other closings costs. The sellers in a short sale typically cannot receive any funds from the sale.
Lender Approval
A Lender must approve of the sale. This is accomplished by first sending a Short Sale Package to the Lender(s). Next, the file is assigned to a loan negotiator at the bank that reviews the Short Sale Package. At this point a negotiation will take place as the bank wants to get as much money as possible from the defaulted loan and the potential buyers want to spend as little as possible to purchase the property. During this process the bank will order a Brokers Price Opinion or an Appraisal. Once the bank agrees to accept a certain discount off the mortgage amount, Short Sale Approval Letters are furnished by the bank and a closing follows thereafter.
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