Understanding Short Sales

As foreclosure rates hit record levels, more sellers are turning to short sales as a way to avoid foreclosure. So, how does it work? In a short sale, the seller arranges with their mortgage lender to accept a price that's less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn't have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property.

Sounds good right? Well, sellers need to know that a short sale may damage their credit, though probably not as much as a foreclosure. Also, lenders generally will only agree to a short sale if the seller is many payments behind and has received a default notice. Buyers may get a great property at a discount, but they also will need to go through some extra paperwork too. Not to mention, they also need to be prepared to roll up their sleeves if that new property needs fixing up.

In the Portland area's distressed-property marketplace, buyers with financial stability, guile, a little available cash and patience (lots of patience, in some cases) are finding deals that would have seemed impossible just a year or two ago. Short sales are an increasingly popular mechanism for avoiding foreclosure, but successful short-sale purchases require patience, homework and negotiating skill.

The complexity and length of the average short-sale transaction means that many potential deals fall through because 30- to 60-day financing locks expire, or buyers simply lose patience with unresponsive mortgage holders and walk away. A short sale generally takes at least 60 days -- and can often take 120 days or more to conclude.

If you have any questions about buying a short sale or if you are interested in selling your home and you think you might be in a short sale situation, please contact me for more information.

Source: Realestate.aol.com and Oregonian Home Section, October 12, 2008