A SHORT SALE IS
DAMAGE CONTROL FOR THE HOMEOWNER
When the owner of a property owes more than what a property is worth and they have for whatever reason, fallen behind on their payments. The bank holding the mortgage may agree to accept a settlement offer (aka a short sale) in exchange for releasing its lien on the property.
There are clear advantages to a short sale over a foreclosure for both the homeowner and the Bank in virtually all situations. For homeowners, a short sale removes their burdens and allows them to move on with their lives. Credit ratings are not ruined as with a Deed In Lieu or a Foreclosure action, allowing you to regain your financial stability and qualify for a new mortgage at some time in the near future.
The bank has already calculated its recovery costs to pursue a foreclosure in the form of legal fees, taxes, insurance, repairs, maintenance, HOA fees, marketing and selling the property. The foreclosure and holding costs can be quite significant, sometimes adding additional tens of thousands of dollars to their losses. Trying to resell the home in a declining market only increases its losses. It’s not a matter of IF the bank will take a loss; it’s only a matter of WHEN, and for HOW MUCH? If a short sale offer limits the banks losses and gets a non-performing asset off their books, it will generally be accepted. This is Loss Mitigation and banks have dedicated entire departments for the single purpose of negotiating short sales and limiting their losses.