SHORT SALE versus FORECLOSURE.

What is a short sale? A short sale typically occurs when lenders facilitate the sale of a property by accepting less than what they are owed. Simplified example: a home is worth $500,000 and the outstanding loan balance is $550,000. In this example the seller is short $90,000 (In this example the lender is getting $500,000 less 8% for selling costs of $40,000, or $460,000 out of the $550,000 they are owed, hence a shortage of $90,000).

What are the requirements of a short sale? Generally speaking, there must be a hardship or insolvency situation that prevents the owner(s) from making or continuing payments on the loan(s). The mere fact that a home or condo is worth less than the total loans on it is not enough. If a borrower has other assets or equity in other properties that may be converted to cash to pay off the lenders, the borrower may not qualify for a short sale. Each case is different, so please call me with your specific circumstances. The consultation is free and confidential.

What is a foreclosure? A foreclosure is the legal process by which lenders acquire ownership to the mortgaged property which is the collateral for their loan. This process follows a strict procedure that involves many legal steps and the court system. Typically, in a successful foreclosure the primary lender ends up owning the property and will dispose of it as they please. In a successful short sale, the lender never owns the property at any point of time.

Are there any differencees between a short sale and a foreclosure? Absolutely and actually many, both in terms of how different a short sale is from a foreclosure but also how differently they impact the owners' credit, future ability to borrow, and employment in certain cases. For example, many owners who require security clearances for their employment don't know that they will most likely lose the security clearances in a foreclosure, and therefore potentially jeopardize their employment. Please click here to see a detailed list of the differences between a short sale and a foreclosure for the homeowner.

Ben Abdallah, MBA, CDPE, MILHM, Realtor®. Certified Distressed Property Expert and Short Sales Specialist. Direct: (561) 929-9955 or Toll Free: (888) 848-9283. FAX toll free: (888) 840-9283.