What is a Short Sale?
It seems that everyone is talking about short sales these days. But, what is a short sale? Simply put, a short sale allows you to sell your home for less than what you owe. It is an agreement between you and your lender that the home can be sold without the entire balance of the loan being repaid at the time of sale. The devil, of course, is in the details. A full waiver and release from the entire debt is the real goal of a short sale negotiation.
Each short sale must be negotiated to obtain the best and most favorable terms for that particular short sale seller. Short sales are better for a person’s credit than a foreclosure and they allow the lender to obtain a higher recovery for the asset without the additional expense of a foreclosure. However, there are many factors that can affect a short sale including the type of loan, the investor involved, the existence of mortgage insurance on the loan, the presence of additional liens, and the relative skill and experience of your short sale agent.
Before deciding whether to short sell your home, it is essential that you obtain legal and tax advice, and consult with an experienced short sale agent. If you are considering a short sale of your Santa Maria, Orcutt, or Nipomo home and would like a short sale consultation, please call my office to schedule a meeting or a private telephone consultation at (805) 938-9950.
Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She is a Certified Distressed Property Expert (CDPE) and Certified HAFA Specialist (CHS) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.
* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement. Mint Properties is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
Copyright© 2011 Tni LeBlanc *What is a Short Sale?*
I want a short sale, should I continue to pay my mortgage? This question is a constant one for those considering a short sale. I find that ultimately, this is a very personal decision. Some people could not sleep at night knowing that they had not paid for the roof over their head or paid their bills. So, for some, it is a moral issue. Others feel no such obligation to go into further personal debt or deplete savings to continue to make their mortgage payment when they know the end result will be a short sale or foreclosure. For them, it is a contractual and/or business decision. I do not tell people to stop paying their mortgage. It is a personal decision in my book. However, it is clear that you don’t have to stop making payments in order to qualify for a short sale. 
Potential short sale sellers should be aware that if they are still able to make their mortgage payment but their hardship is on the horizon due to imminent circumstances (unemployment, lay off notice, or reduction in pay), they do not have to wait until they are no longer able to make payments in order to apply for a short sale. Short sales with no or few missed payments do happen. And, strictly speaking, a short sale with fewer missed payments is better for your credit than a short sale with a number of missed payments. The decision of whether you should tap your retirement fund or credit card line to continue making payments while applying for a short sale is completely a personal one that should be made with the advice of your own legal and tax professional.
However, not all short sales are in foreclosure. Indeed, many people apply for a short sale when they have a financial hardship that is imminent and they are still current on their payments. Divorce, lay off, job transfer, and illness are all short sale reasons that can be imminent. You do not have to wait until the hardship has actually arrived to apply for a short sale. Indeed, I am seeing an increase in potential short sale sellers who want to remain current on their mortgage but they are applying for a short sale now before they fall behind. Often high wage earners, or those with significant assets feel that they must miss payment to drive home the issue of financial hardship to a lender and they then consequently drive their home into pre-foreclosure. However, contrary to popular belief, you do not have to miss payments to qualify for a short sale. You should explore the possibility of a short sale before you are in default.
