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What is a short sale? 

A short sale is a transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal number of shares at some point in the future. A short seller makes money if the stock goes down in price, while a long position makes money when the stock goes up. In real estate, short sale means selling a house for less than the mortgage owed with the lender's approval.

What is a Short Sale? 


In real estate, a short sale means selling a house for less than the outstanding mortgage on it.

Say Mr. and Mrs. Brown borrowed $400,000 to purchase a home seven years ago. The home was appraised at $400,000 at the time it was purchased.

Mr. Brown loses his job and the couple is falling behind on their mortgage payments. Upon reviewing a comparative market analysis, the Smiths learn that the value of their home has dropped, and it is now worth only $310,000.  Faced with $385,000 left on their loan, the Smiths prefer to sell their home, rather than seek government refinancing options like the federal Home Affordable Refinance Program, and ask their lender for permission to sell it for $310,000.

When the home sells, the bank will get back less than the full amount the Smiths borrowed; in most cases, however, the lender will consider their mortgage paid in full.The transaction benefits the bank by allowing it to avoid repossessing the home in foreclosure, which is expensive and time-consuming, and it benefits the seller by allowing him or her to avoid the negative credit ramifications of foreclosure (and the bankruptcy that sometimes accompanies it)



Short Sale vs. Foreclosure

Short sales and foreclosures are both financial options available to homeowners who are distressed borrowers: behind on their mortgage payments, have a home that is underwater (that is, worth less than the outstanding balance on the mortgage) or both. The owner is forced to part with the home in both cases, but the timeline and other consequences are different in each situation.


There are different reasons for why a homeowner would opt for a short sale versus a foreclosure.

Short sales are usually initiated by the homeowner, often when the value of a home drops by 20% or more. Before the process can begin, the lender that holds the mortgage must sign off on the decision to execute a short sale. Additionally, the lender, typically a bank, needs documentation that explains why a short sale makes sense; after all, the lending institution could lose a lot of money in the process.

If approved for short sale, the buyer negotiates with the homeowner first and then seeks approval on the purchase from the bank second. It is important to note that no short sale may occur without lender approval.

Short sales tend to be lengthy and paperwork-intensive transactions, sometimes taking up to a full year to process. However, short sales are not as detrimental to a homeowner's credit rating as a foreclosure is. A short sale looks better to future lenders and creditors: It shows you took action before the bank had to repossess your home. A homeowner who has gone through a short sale may even, with certain restrictions, be eligible to purchase another home immediately.





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 This question could be interpreted in several different ways. Getting a loan modification, meaning that the borrower is able to negotiate terms with their lender and make their payment more affordable. For the past two years our Company has 85% Approval rating and success rate.