Education Station: Short Sale
Posted by mmetz on March 17th, 2010
Knowledge is power! So when you don’t keep yourself in the know, then how can you expect to be on top of your money saving game?
Here at MoneyLounge we understand that you may not have the time to research all those finical odds and ends, so we have decided to bring them all to one station, the Education Station. We are gearing up to fuel your brain various financial, mortgage, and investing terms that you may hear all the time but just might not know all about.
The first stop on this financial brain fueling journey is with a term that is being thrown around these days like rice at a wedding:
Short Sale
“…sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower.”
As you are all obviously aware, housing prices have plummeted. The prices have gone so low, that they are much much much lower than the original purchase price. Good news for the buyer, terrible news for the seller, and even worse news for the struggling home owner.
If you have taken out a mortgage before housing prices started their cliff dive, then you could be stuck owing more than what your home is currently worth. This is a huge problem when trying to sell your home because if you mortgaged your home for $250,000 and you can only sell it for $200,000 then you will still owe the lender $50,000!
You have now entered short sale territory. This is not a good place for you or the lender because everybody loses.
Unfortunately, bad things happen to good people and you might be one of those good people. Having unexpected high medical expenses or losing a job could cause you to be unable to keep up with the mortgage payments and make you eligible for a short sale. Short sales must be approved by your lender and since there is no standard approval process, the steps and requirements will vary from lender to lender. It is solely up to the lender if they want to do a short sale because remember the house is worth much less than what you owe on it; and depending on the lender, you might not even have to have a buyer to do a short sale.
Hopefully you will never have to be in this situation where you are in extreme hardship, but if you are; your lender might consider a short sale.
Watch out for more Education Stations every week, and get ready to fill up on knowledge to keep you on top of your financial game!
Sources: Wikipedia.org // PhoenixRealEstateGuy.com
Photo by: 87913776@N00 // CC 2.0
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