Our Program - What is a Short Sale?
A short sale is a transaction in which an owner sells their property and the mortgage company agrees to reduce the outstanding debt and accept a payment of less than what’s owed.
To illustrate this, here’s an example:
When the market was hot, Mark and his wife Debbie bought a townhouse in a Naples gated community as an investment property. The purchase price was $350,000 and they took out a $325,000 mortgage to finance the transaction. One year later, their investment dropped in value significantly and they could not get enough rental income to break even each month.
To short sell the property, Mark and Debbie listed it for sale and upon receipt of a valid offer a proposal package was submitted to their bank. For the sake of this example, let’s assume the offer came in at $250,000, which is $75,000 less than the outstanding debt. At this point, the Mortgage Mayday negotiators would go to work and get the bank’s approval to accept a payoff of $250,000 instead of $325,000. Once the approval is received the sale moves forward and in most cases the sellers bring nothing to the table. The purchaser buys the property and the bank is paid the amount agreed upon in their approval.
By doing a short sale, clients like Mark and Debbie can escape from a poor investment and put and end to their financial drain. They are able to avoid foreclosure and bankruptcy – both embarrassing alternatives that would have left them with significant damage to their credit scores. More than anything, they can walk away without the ongoing burden of owning a distressed property.
If you are still unsure of the many advantages of short sale transactions, please feel free to visit our FAQ section or contact us directly for more information.
