The Short Sale Definition

The term short sale has become common. People are wondering whether to go for a short sale or for a foreclosure. It may be difficult to decide on what to do. However, once you understand the short sale definition then you are at a better position to decide on the course to take. Many complaints have been registered that the blogs and articles posted on the real estate agents’ websites are more technical because the agents present the short sale information exclusively professionally. It is therefore better that we understand it in relatively more simple terms.

This is the short sale definition at a glance: the lender of some property accepts the sale of the property for a total sum relatively lower than the face value or total value of the mortgage loan. Very simple! However, we now have to understand the short sale definition a little more deeply.

There are three important parties in a short sale—the lender, the seller and the buyer. A short sale does not become good news to the seller of the house on a wider scale. It therefore comes to play in times of financial difficulties when you discover that the total amount you have is less than the total mortgage, hence it is impossible for you to repay your mortgage in full.

Let us look at it practically now. You may have a mortgage that is worth $800,000. It then happens that you are facing financial difficulties such that you are unable to repay the mortgage. You can consider a short sale then. First, you must find a buyer who is willing to pay for the house. You can then approach your lender and tell him of your intentions to short sell the house. The lender will then decide if to carry on after searching all the short sell information from brokers and agents. The lender will then assess the value of the house and compare it with the market value of similar properties. If the lender finds it acceptable then he can accept the house to be short sold at a price of say, $650, 000. In this case, you save $150,000 on the mortgage.

The need for short selling may also arise when you have a mortgage of say, $500,000. However, you discover that the real market value of the house at the moment is $400,000. You may then consider a short sell so that you don’t end up paying a total of $500,000 because you can prove the financial difficulties so that your lender can accept a sum of about $400,000. This will enable you save $100,000 on the mortgage amount.

Short selling is very critical. The lender simply forgives the amount by accepting to take an amount relatively lower than the market value of the loan thus giving you a saving. There are many benefits that accrue to the parties in a short sale as well: the buyer obtains the house cheaply, the seller retains a good credit score while the lender sells the house at a reasonable market price without having to undergo the stress of waiting for several months to sell the house.

 

 

 

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