A short sale is a vehicle to dispose of property that you owe more than you could sell the property for in a regular sale.  For example, an individual borrows $100,000 from a bank to purchase a piece of property valued at $100,000.  The individual has difficulty paying the mortgage due to a loss of income.  The individual then may decide they want to sell the property and relocate to a cheaper living arrangement. 

            When a property owner sells property, there are costs involved in that transaction.  Some of these costs are called closing costs and include attorney fees, recording fees, title insurance fees, inspections fees, title work fees property taxes, loan origination fees and other finance fees etc.  These fees typically range from 2% to 5% of the selling price.  Additionally, there are real estate broker fees that come into the equation.  In some situations, a person interested in selling their home must have enough equity or (value above the loan balance owed) in order to not have to pay money out of pocket for the transaction. 

            In most cases, an individual who purchases a home at market value will not see equity in their property for years to come.  So selling the home after living in the home for only a short time could mean that the transaction will be at a loss to the seller.  In some situations, the seller does not have the money to pay the expenses associated with selling the property and there is not enough equity in the property to make up for those expenses during the sale of the property.  The borrower must make a decision whether the buyer will simply vacate the premises and wait for the bank to foreclose on the property because the borrower failed to pay the mortgage payments.        

            The foreclosure process involves attorney fees, court cost and other expenses that are charged to the borrower.  At the conclusion of the foreclosure process the home is re-sold by the bank at a reduced price because foreclosed properties usually sell for less than the market rate.  For example, the home may have re-sold for $80,000.  The lower selling price means that that there is a $20,000 loss for the bank, otherwise known as a deficiency.  The borrower is responsible for paying that loss or deficiency experienced by the bank.   In addition, the borrower is responsible for paying all the associated cost of the foreclosure incurred by the bank, such as attorney fees, court cost, title cost, etc.  There is a way to avoid all of these costs and that is through a short sale. 
           
            A short sale can occur in many different ways.  Once a borrower realizes that they cannot afford the home and that the home value is about the same as what is owed on the mortgage, the borrower should immediately call me because the short sale process can take some time.  A short sale allows the borrower to sell the property for whatever the house can sell for on the current market.  In addition, the mortgage will not seek the deficiency from the borrower.  If you are interested in discussing short sale options please contact me.  I will help get you through the process and get you to the place where you can breath again.