What is a Short Sale?

Just a few short years ago, the majority of us had never heard of the term "Short Sale." Now the latest data shows that Short Sales comprised 20 percent of the sales in Forsyth County last quarter - a greater number than foreclosures, which were just 16 percent. I find that most people have heard the term, but aren't actually sure what it is.

A "Short Sale" occurs when a lender agrees to accept less than the amount owed on a promissory note (a.k.a. mortgage). For example, Joe bought his house at the peak of the market for $300,000 and still owes $285,000. The current market value of the house is only $210,000. The lender agrees to have you sell the home for $210,000. 

However, just because your house is worth less than you owe on it, doesn't mean that the lender is going to approve the "short sale." You must have a legitimate "hardship." A hardship is typically limited to job loss, decrease in income, increase in expenses, divorce, medical emergency, or death. For example, if you qualified to buy the home on a dual income family and now you only have one income, you may qualify.

Often both lenders and sellers will consent to the short sale process, because it allows them to avoid foreclosure. This agreement, however, does not necessarily release the seller from the obligation to pay the remaining balance of the loan, known as the deficiency. The deficiency may be released by the lender at their discretion.

Let me know what questions you have and we will discuss those next.

Are you going through a short sell? If so, tell us about your experience in the comments!

You might also be interested in reading:

Home Sales in Forsyth County Beginning to Flip Flop

Forsyth Home Prices Increase for 1st time in 3 Years!

Forsyth County Back to a Seller's Market!