Short Sales
What is a Short Sale?
In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the borrower. This negotiation is all done through communication with a bank's loss mitigation or workout department.
The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. This process does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
NegotiationsLenders have a department (typically called "loss mitigation") that processes potential short sale transactions. Today, lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Credit ReportingA 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.
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