Question: What is a Short Sale?

Answer: A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.  For example, if you owe $300,000 on your home, but the market value is only $250,000, your bank may agree to accept $250,000 as payment in full and release their lien against your home.  The name, Short Sale, comes from the fact that the Lender's payoff is "short" of the amount owed. In fact, the lender will also be paying the real estate commissions and other closings costs. The sellers in a short sale typically cannot receive any funds from the sale.

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Question: Why do a short sale? What are the benefits to a homeowner?

Answer: If the homeowners owes more on the house than it is actually worth and are having difficulty making the monthly payments, a Short Sale may help avoid the devastating effects of a foreclosure on their credit.

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Question: How much will it cost me to do a Short Sale?

Answer: Generally speaking, there are no costs incurred by the homeowner. The lender that has approved the Short Sale typically pays all the commissions and closing costs.

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Question: Why are banks willing to do a short sale?

Answer: Because the alternative is foreclosure, and the foreclosure process is usually far more expensive than the discount the bank takes on a short sale.

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Question: Will the homeowner’s credit be impacted for doing a Short Sale?

Answer: A Short Sale is reflected on the homeowner’s credit report as something to the effect of “Discounted Payoff, Paid in Full”. A Short Sale is far less damaging to the homeowner’s credit than a foreclosure or deed-in-lieu of foreclosure.

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Question: How much time do I have before I get foreclosed?

Answer: The foreclosure period in Texas is 21 days, which is one of the most aggressive foreclosure processes in the nation. Many homeowners make the mistake of not taking any action to avoid a foreclosure until they receive their Foreclosure Notice, and at this point, it may already be too late. If homeowners call their Short Sale Specialist for help as soon as they start receiving default letters from the lenders, the more likely it is that a foreclosure can be avoided.

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Question: Will the homeowner get any money at closing?

Answer: Generally, no. Given that the bank is taking a financial hit in a Short Sale, and the bank is covering most of the costs associated with the short sale, they want to make sure that the homeowner does not benefit monetarily from the transaction.

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Question: Should the utilities be left on during a Short Sale?

Answer: Yes, because the buyer will generally order an inspection and the utilities will need to be on for the inspection.

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Question: Can any real estate agent help me with a short sale?

Answer: Most real estate agents do not know how to do short sales, and most will hand them off to another agent who knows more about them. Agents who do try a short sale without the background or training usually have disastrous results and could actually do the homeowner more harm than good. Try to contact a real estate agent who has short sales experience or training.