A short sale occurs when a property is sold for less than the mortgage (balance of debts) owed by the property owner. Creditors and borrowers often agree to a short sale is often as an alternative to foreclosure to avoid additional fees and costs. However, a short sale cannot avoid negative credit report repercussions for the home owner/borrower.
Often referred to as a pre-foreclosure sale, a short sale allows approved home owners to sell their home and pay off a portion of their mortgage with the proceeds. The mortgage company must agree to release their lien on the real estate and accept less than the amount owed on the mortgage.
In most states, not including California, borrowers are still responsible to repay any shortfalls on the loans, unless the parties contractually agree otherwise.
A Short Sale is an alternative to foreclosure and may be an option* if:
- You are ineligible to refinance or modify your mortgage
- You are facing a long-term hardship
- You are behind on your mortgage payments
- You owe more on your home than it’s worth
- You have not been able to sell your home at a price that covers what you still owe on your mortgage
- You can no longer afford your home and are ready or need to leave
*SOURCE: Fannie Mae