What is a Short Sale?

A short sale is a sale in which the value of the property is less than the current mortgage amount, and the homeowner may no longer able to make the payments due to illness, hardship, or other cause. A lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy. Instead of buying from a seller, you are purchasing the property directly from the lender for a discount. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $300,000. You write an offer to the lender for $220,000, which is accepted as full payment for the loan. This is a short sale. Why are they willing to take such a discount? Several reasons. First of all, banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished with the headache of it all.

At the time of this writing, foreclosures are at an all time high, which basically translates into more opportunities for you. Since foreclosures are increasing, this is the perfect time to jump into this because there will be more and more lenders discounting properties. It is safe to say that most lenders will accept a short sale, however, you may come across one or two lenders who will not discount. If the numbers work out for the lender they will do it.

Don't be scared off by these short sale properties as they may turn out to be a great deal for you. But you need to know a few things before you decide IF you want to pursue a short sale purchase:

A seller must disclose if the home either IS a short sale or likely will be due to the market value.
A short sale MUST be approved by the lender. Even though a seller might accept your offer, it will be subject to approval by the lender
The Lender will (likely) send out an appraiser to evaluate the property in light of recent sales - they are looking for market value, too, and you cannot expect a short sale to be a fire sale (i.e., it may NOT be a great deal after all)
The Lender must receive hardship letter and other required documents from the seller in order to approve a short sale
The Lender will likely have a checklist of requirements and paperwork required for the short sale process
·The Lender will likely request that the sale be "as is" and due to hardship will probably not approve any credit for repairs
Be prepared for a short sale to take more time (total time may be 60 days +/-) - this is one of the biggest complaints from buyers

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I will be happy to provide you with a list of Short Sale properties in any area in South Orange County, CA