What is a bank short sale?
A bank short sale is commonly known as a “short sale.” But since a short sale or selling short is also a stock market term, a bank short sale more specifically refers to a short payoff for a home mortgage. A bank short sale is an arrangement where a bank or lender agrees to accept less than the full balance of the mortgage as an alternative to foreclosing on the home mortgage, which frequently can be a more costly process than agreeing to a short sale.
A bank short sale benefits both the lender and borrower. A borrower or homeowner who has fallen behind on mortgage payments is better off selling the house on a short sale to avoid further damage to their credit rating. Foreclosure is the most damaging black mark a borrower can have on their credit report. A foreclosure can cause a borrower’s credit rating to drop by up to 400 points and prevent a borrower from buying a home for many years into the future. Worse yet, many employers require decent credit as a condition of offering or maintaining employment.
Since foreclosing on a loan can be extremely expensive, it is much cheaper for a lender to agree to a short payoff or short sale on the property. Banks are not in the business of owning property, so they would much rather the borrower take care of the property while it is being marketed for sale, than manage the property once they acquire ownership after a foreclosure sale. Worst yet, banks really don’t like bearing the wrath of a disgruntled homeowner who damages, vandalizes and destroys much of the house when they are forced out in foreclosure.
In order to qualify for a short sale, a homeowner must demonstrate a hardship situation. However, some borrowers are granted short sales even if they are not in a true hardship situation. In these cases, banks might pursue them later through a deficiency judgment or ask that the seller contribute money to close the deal.
When is a good time to do a bank short sale? If you are behind on payments or thinking about stopping payments on your mortgage, make sure you have a great bank short sale negotiator on your team. Feel free to fill out our short sale form, or call us to discuss your particular situation. All of your information will remain strictly confidential. We can help you prepare your short sale package, negotiate your bank short sale with the goal in mind to obtain the best possible result for your situation.
If you have any further questions about short sales, please contact us.