A short sale is the sale of a property by which terms the mortgage lender agrees to accept a loss on the repayment of his loan.When a property owner has ceased to pay his periodic payments, then decides to sell, he might find out that the market price of his property has declined in such a way that, not only he has no equity, but his debt is higher than the present value of the real estate.If the seller can pay the difference, the lender and any other creditor would then be paid in full and the sale completed normally.
If he cannot afford to pay the difference, the mortgage lender, to avoid foreclosure and more damage, has the option to absorb the loss and go along with the sale, avoiding a foreclosure that will possibly cause larger losses.Usually the seller will put his property for sale and once an offer has been made, he will submit it to the lender. An approval on the deal will be necessary and once obtained, and any other debt has been satisfied by the seller or the lender, the sale would be completed.Desperate homeowners initiate short sales procedures to avoid foreclosure, which is very damaging to their credit. Buyers look for short sales because they allow them to get a home at a deep discount.From a buyer point of view, it is essential to have some understanding of the whole process, to avoid a waste of time and even of money, by pursuing hopeless cases. All short sales do not stand the same chance of getting the bank or banks’ approval. Many of them will never complete, and some will need much more work to get to the closing table than others.
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