Short Sales

What is a short sale?  This is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts owed to the lender(s).

In the case of a short sale, the property owner cannot afford to repay the loan(s) full amount and the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.

Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers of their deficiency, and their obligations to repay any shortfalls on the loans.   

A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the lender and borrower.

Both often result in a negative credit report against the property owner.

Real estate industry data indicate that there were 2.2 million short sales in the United States during the period of the subprime mortgage crisis from 2008-2013.

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The Federal Housing Administration instituted a program on August 15, 2013, called “Back To Work Extenuating Circumstances” act, to assist potential borrowers who had faced financial hardship during the recession. The BTWEC program provides a second chance for mortgage applicants who can prove hardship during the recent recession such as unemployment or a severe reduction in income beyond the borrower’s control. The program was designed to help borrowers with a recent history of foreclosure, judgments, short sale, bankruptcy, loan modifications or deed-in-lieu by acknowledging that the potential borrower’s credit history may not fully represent their ability to repay a mortgage.  Prospective borrowers affected as described above, must provide documentation of the financial crisis, and prove the situation was out of their control. They must prove that they have recovered, complete a housing counseling program and can then apply for an FHA-insured mortgage allowing up to 96.50% financing.