The World of the Short Sale

Definition:
A short sale is an "arrangement" between the current owner of a home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The "deficiency" is the difference between the amount owed and what the bank collects at the short sale.

Recently I've been looking around at real estate property in the West Sac area and I've come across something I haven't heard about before called a "Short Sale". The first thing that came to my mind is that the length of time it takes to close a deal will be shorter than 30 days, but in fact it actually takes longer usually 45 to 60 days. It is the point right before someone goes into forclossure and the seller tries to sell it to the bank for less

Short sales have become increasingly common. Sue Hunt, of Consumer Credit Counseling Service of Greater Atlanta, says that her nonprofit is currently advising "50 or so" clients to short-sell their homes to try to avoid foreclosure. (Read "Facing Foreclosure? 9 options.")

Margot Murphy, a Portland, Ore., real estate agent, trains brokers in short sales through her company, Real Estate Pro Guides. It's not easy to negotiate a short sale in which the bank must swallow a loss. Mortgage bankers are often slow to recognize how slow their markets have become, Murphy says.

"Some lenders are great with it and others, you just beat your head against the wall and say, 'What's wrong with this guy?'" Agents must make the case that a foreclosure could cost the bank even more. Since foreclosures yield no commissions, agents are motivated to achieve a short sale, in which the mortgage lender pays the commission.

Nationally, perhaps a half million loans yearly are eligible for short sale, Murphy guesses. Terms like "loss mitigation" and "customer retention" are new mortgage banking buzz words. She describes "a kinder, gentler mentality" in loan-servicing nowadays "because mortgage lenders want to have a good reputation with their borrower-consumer, to assist them with other options instead of slamming down the hammer."