Short Sale

When a property sells for less than its debt, the sale is short, hence a short sale. This typically occurs when property values drop and the property owner is no longer able to continue making the property payments. Before listing the property, the seller gets permission from the lender. After a successful short sale, the lender releases the property as collateral.

Lender and Seller

Before entering into a short sale negotiation, it is to the buyers benefit to understand the process and the role each participant plays. Short sale listings have a reputation for falling out of escrow or taking a long time to close. One reason for this is the additional steps needed for closing a short sale. After making an offer the seller accepts, the offer goes to the lender. Though the seller accepts your offer, that does not mean the lender will do likewise. The lender has the option of accepting, rejecting or countering your offer. Even if you make a full purchase offer, offering the full amount of the listing price, it is possible for the lender to reject or counter your offer.

Unpaid Amount

If the lender has agreed to forgive the unpaid amount of the loan, after the close of escrow, the seller might accept any offer, just to see if the lender accepts, since the seller isn’t receiving funds in either case. Yet, if the seller is going to be responsible for paying the unpaid amount of the loan, the seller will be more likely to reject your offer, before it goes to the lender. Accepting a lower offer in this case means the seller must come up with additional funds to close the deal. State law may prohibit or limit the lender’s ability to file a deficiency judgment against a seller.

Motivation

References

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