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What is a Short Sale Anyway?

An increase in foreclosure rates will inevitably bring with it an increase in short sales. But what is a short sale?

A short sale happens when you sell your house for less than your remaining mortgage balance, the proceeds of which go to the lender and in return the lender forgives the remaining balance. Selling your home as a short sale is one way to avoid foreclosure.

As a general rule, lenders lose money when they foreclose on a property. Consequently, they would rather not have to foreclose if it can be avoided. A short sale represents an opportunity to cut their losses because a short sale usually allows them to recoup more of the cost of the loan than a foreclosure process would.

However, don’t think that a short sale is an easy thing to accomplish. In order to get permission for a short sale, you must provide documentation showing a genuine financial hardship. And don’t think that the decision for accepting a short sale is solely in the hands of the lender. Sure the lender must first agree, but this is not the final word. If there is mortgage insurance involved, this company also gets input on the decision. If there is an investor backing the mortgage, they also get input as to whether to accept a short sale.

The transaction process for a short sale can be rather cumbersome as well, whether you’re on the buying or selling side. Many short sales fail due to additional demands by the lender, such as requiring the broker to reduce his or her commission and/or that the seller signs a document requiring him or her to pay back the shortfall.

If you’re on the selling side of a short sale, consider having your agent or other experienced professional negotiate with your lender for a better deal. And remember, if the lender does accept a short sale and forgives part of your debt, that is considered taxable income and you must declare it as such to the IRS.

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I was very selective in finding the right realty and realtor. ERA Kings Bay had outstanding reviews and GInny was an absolutely perfect fit in all the qualities we were looking for. We were treated like family and not as another client. Ginny was patient and made sure we found the perfect home. I thank ERA and Ginny for an exceptional experience. I will definitely recommend ERA Kings Bay and Ginny Jacobs.
Lori was amazing from the first meeting until the day of closing. She was very thorough in explaining the process and helped us every step of the way. Lori kept us informed and was very responsive when we had questions, Lori's knowledge and attention to detail is exceptional. We appreciate the way that Lori communicated and handled every step with her expertise. She made the whole process so easy for us! I would highly recommend Lori to friends and family and she will be my first call the next time I have any real estate needs.
In our opinion, Deborah is the perfect agent. She kept us well informed and responded to our calls in an expedient manner. She was a pleasure to work with and guided us throughout the entire process. We are looking forward too working with her in the future.
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