A ‘short sale’ occurs when a bank accepts a discount on a mortgage to avoid a possible foreclosure or bankruptcy. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the loft/condo owner, the advantages include avoidance of having a foreclosure on their credit history and the partial control of the monetary deficiency. Additionally, a short sale is typically faster and less expensive than a foreclosure. Many homeowners have been unfortunate enough to be living in homes worth less than they bought them for just a few years ago. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.

Short Sale 101 Video

In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Negotiations
Lenders have a department (typically called "loss mitigation") that processes potential short sale transactions. Typically, lenders do not accept short sale offers or requests for short sales until a Notice of Default has been issued or recorded with the locality where the property is located. Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator's approval. Multiple levels of approvals and conditions are very common with short sales. Junior liens - such as second mortgages, HELOC lenders, and HOA (special assessment liens) - may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even when unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale.

Credit reporting
A short sale does adversely affect a person's credit report, though the negative impact is typically less than a foreclosure. Short sales are a type of settlement. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information it is typically possible to obtain another mortgage 1-3 years after a short sale. While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating mortgage balances on a credit report to reflect a zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.

Market Conditions Effect on Homeowners
The real estate marketplace has undergone dramatic changes in recent months. More and more buyers are finding themselves in homes they can no longer afford and or which are now worth less than what is owed. In many cases this was made worse by mortgage rate adjustments which lead to payment increases. As a result, borrowers are unable to pay their mortgages and default rates have skyrocketed.

Even borrowers who are capable of paying their mortgage are under a great deal of pressure. They do not want to continue paying a mortgage on a property worth less than what they owe.

Risks
Not being proactive under these circumstances is quite risky given the severe consequences following mortgage default, especially given the long lasting impact from the information which remains on the credit report for years.
Lack of knowledge regarding available solutions shouldn't be a deterrent in motivating property owners to actively seek a solution.

What we Offer
Our team was formed as a consulting solution that can help protect homeowners. We knew that we could help homeowners avoid the negative consequences that follow mortgage default and help them protect their credit. Our specialists have helped property owners achieve a fresh start. Our expertise is in negotiating a favorable solution that will protect the interests of the property owner when facing the lender.

There is no magical fix. However, there are very powerful solutions for which a homeowner is very likely to qualify for. Finding a solution that is appropriate and that will be approved is vitally important. Why? The answer is that time and other constraints usually allow for only one attempt. That is exactly where our expertise comes into play. We help home owners identify the best solution and then negotiate with the lender on their behalf.

Lenders negotiate aggressively, and are very powerful when they negotiate directly with the borrower. Having a team of experts in your corner is invaluable and will put you, the borrower, in a much stronger negotiating position.

For example, a homeowner who took out a loan for $600,000 to buy a home a few years ago has negative home equity as the value of the property may have dropped to $500,000. The homeowner may say to him/herself, “Why continue paying more for a home that is worth less than I bought it for?” Our team presents a perfect solution to both the troubled homeowner and the lender. To avoid foreclosure and the frightening consequences involved, the homeowner may be able to sell the property at a loss and start fresh. You may ask yourself, “Why would a lender take a loss on the sale of a home? Isn’t that a horrible business practice?” The answers are simple. The banks do not like excess inventory and delinquent loans on their books. They know that taking control of a foreclosed property is an expensive and time consuming liability. There are many fees involved like property taxes, liens, and repairs. Banks do not want to be responsible for property management as it’s not part of their core business practice. It’s better for them to take the minimal loss beforehand and be finished with the ordeal.

Why Should I Choose a Short Sale?
Short Sales are usually undertaken because the homeowner is out of options and does not want to experience the tragedy caused by home foreclosure.

Typically when someone is at the point of not being able to afford their home due to high rates, dips in property values, divorce, loss of employment, decrease of income, etc., then they are forced to make a life-altering decision.

If your home is foreclosed upon it will ruin your credit for seven years. That means you will have extreme difficulty finding any bank to loan you money. You can forget about being able to buy another house, a car, open a new business, or even qualify for credit cards. On top of that, the loans you do receive will have incredibly high interest rates as you will be considered a credit risk by credit card companies and banks.

With a Short Sale you have the ability to save your credit from reflecting a ‘foreclosure’ as to simply having a ‘settled debt’.

Our company offers a way out of debt and leads to a fresh start. Listed below are some of the reasons to conduct a Short Sale:

1. Erase a large debt (See example)
2. Get debt free fresh start
3. Minimize damage to credit
4. Take charge over the foreclosure process
5. Avoid eviction
6. Allow yourself the option to move anywhere you want without having the burden of bad credit making it difficult to rent or buy.

What are the Top 5 ways we have helped our clients?
-Protecting your credit from further degradation.
-Presenting a solution to the lender and negotiating favorable terms.
-Helping to minimize your debt obligations.
-Allowing the borrower and her/his family to get a fresh start.
-Expediting the process with a fast resolution.