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What is a " Short Sale " ?
If you are in the process of buying your home you need to understand the meanings associated with the financing which allowed you to purchase. The most common term heard lately is " Short Sale " . It is used to describe a situation where the home owner may be contemplating a sale due to loss or change in employment, health issues or other circumstances which may force a sale. Take this example: A couple buy a home with a purchase price of $450,000. They make a typical downpayment of 20 % ( $90,000 ). It doesn't matter where the money came from. So, the balance financed is $360,000. For whatever reason, they decide they must sell the house. Since the purchase of the home the market has changed a lot. Their home is now worth $310,000 ! They list it with a Realtor and agree to a sale price of $305,000. The difference between the net sales price ( $ 305,000 minus expenses and brokerage fees, repairs, etc ) and the amount still owed the bank is the responsibility of the seller. Lets say that the difference in our example is $65,000 . The proceeds of the sale are " Short " $65,000 versus the amount still owed the lender. Hence, the term " Short Sale ". In the current market a seller may not get any acceptable offers. Or the offers may be so low that the only option may be to consider foreclosure. In a short sale the bank must approve or " forgive " all or some of the shortfall. To do this a seller must meet certain requirements of the lender. These requirements include a hardship letter, proof of inability to pay, etc. Still, a short sale on your credit is far better than a foreclosure ! You should call your lender and meet with them as early as possible to discuss alternatives such as re-negotiation of the terms, etc. Lenders do not want to take back your home ! They are more open to working with you than ever ! Also, do not, DO NOT PAY A COMPANY TO HELP YOU WITH THIS SITUATION ! They are scammers of the worst kind. Talk to your lender, work with your lender. Try to see past this most difficult time. You can come out the other end and get on with your life Good luck to you ! |
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