Short Sales In The East Bay: How Do These Work?

A “Short Sale” is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, this may be appropriate for a Pleasanton home seller whose mortgage balance is $650,000 but whose home wouldn’t sell for more than $600,000.  Rather than pay the $50,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance may be forgiven.

Short Selling a home can be a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on their credit report for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Compared to an executed foreclosure, however, Short Sale damages are more  limited on both sides.

For this reason, they are sometimes considered “the economical alternative” to default.

The process of getting approval to do this varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.

For more information, call Rodil San Mateo, Certified Mortgage Planning Specialist (CMPS) at (925)-922-0470.

If you have questions on this, contact Rodil San Mateo at RSanMateo@EastBayLoanTips.com or call (925)-922-0470.