A Short Sale occurs when a home is sold and the sales proceeds do not fully pay off the loan or loans on the property and one or more lenders accept a discounted payoff and allow the sale to close escrow.

    Because lenders are not obligated to accept discounted payoffs the success of a short sale transaction is generally achieved through the skill and hard work of the Real Estate Professional handling the transaction.

    As real estate markets across the country shift from hot to cool, more and more sellers are finding it difficult to meet their mortgage obligations. Many homeowners are staring down the barrel of a mortgage payment adjustment on their adjustable rate loan that will push their payment beyond the range of afford ability. Unfortunately, refinancing will only help those that have enough equity to get a new loan.

    In the meantime, life marches on for other homeowners. Job transfers happen, people get married and divorced, injury or illness will strike some and job cutbacks mean income reductions for others. When the unexpected forces the sale of a home, market conditions like we have now often result in an equity deficient transaction. 

    The aggressive lending practices of the past several years have created a huge pool of loans that can be fairly described as "at risk." As many markets in the country, large and small, experience softening and in some cases significant value declines, the homeowners who are "at risk" can't simply sell and payoff the loan.

    Mortgage lenders of all types and in nearly all locations will be faced with a high volume of non-performing loans on equity deficient properties over the next several years.

    REQUIRED DOCUMENTS...All mortgage holders being asked to approve a discounted payoff will want to review the homeowners financial circumstances before approving the proposed transaction. The following are some of the documents that will need to be collected by your Real Estate Agent.

1. Two years tax returns - most recent

2. Two months bank statements

3. Two months pay stubs

4. Personal financial statement

5. Hardship letter

    DISCLOSURE...

* Homeowner is not relying on agent for legal or tax advice. Homeowner is advised to consult with an attorney and tax professional.

* There is absolutely no guarantee that the short sale will be approved.

* Late mortgage payments will have a negative impact on the homeowner's credit file and will effect homeowner's ability to secure credit in the future.

* There are potential income tax consequences to a short sale related to debt relief.

* Agent does not verify the accuracy of documents provided directly, or indirectly, by homeowner.

* Though it is rare for a lender to pursue a deficiency judgement, some loans provide the lender with that option.

**NOTE: If you have assets, particularly liquid assets like cash savings, stocks or a certificate of deposit, the lenders will want to take a close look and will probably either deny the Short Sale or ask for a capital contribution from the borrower.