An Introduction To Short Sales

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Short Sale Home For Sale Real Estate Sign and House - Left Side.A short sale occurs when a home is sold and the seller cannot fully pay the balance of outstanding mortgages, judgments, or liens on the property. Typically, a short sale occurs when the property is sold for less than the outstanding mortgage on the property, however it may also occur when there are multiple liens attached to the property, such as past-due homeowner’s association fees, Federal or state tax liens, or judgments.

A short sale typically takes longer than a regular sale, as the seller will need to obtain the approval by all the lienors which sets forth what each particular lienor is willing to accept in order to release their claim against the property. Most times the lenders will require personal and financial information about the seller and will scrutinize the information so they can know why the seller is not making regular payments on his/her obligations and/or cannot fully pay off the obligation.  Sellers must demonstrate a hardship to the lender.  Usually a hardship is considered, but not limited to, for:  loss of income, loss of employment, catastrophic medical conditions, death of one of the borrowers, forced re-location due to employment or military service.

Due to the review of documents and determinations of what the value of the property is actually worth, the closing may take a longer time to complete. The approval and sale process may potentially require around three to four months to complete, but at times the process may be longer or shorter based upon each seller’s facts and circumstances. However, once approved by the lienors, the closing will need to take place quickly, typically within forty-five (45) days of the approval. Further, short sales are generally sold “AS IS,” and the bank will generally not accept any contingencies on repairs, unless the repairs are absolutely required prior to a sale, such as repairs for structural damage or those items required by law, but many times lienors require the repairs to be paid by the buyer.

Why should a person subject themselves to a short sale, either as a seller or a buyer? There are various reasons. Many short sales are sold at a discounted value in comparison to other properties, in part due to the time it takes to complete the sale. Buyers therefore get the benefit of purchasing a property at a price typically lower than market value. The benefit to a seller is that sellers are able to vacate the property without having a foreclosure on their record. Additionally, sellers will be able to negotiate with their lenders for a release of liability for the deficiency — the difference between what is owed and the amount the lienor receives. A waiver or reduction of deficiency is never guaranteed in any short sale negotiation; however, Barry L. Miller, P.A. always seeks to have a deficiency waived.

A short sale can be a complicated real estate transaction. If you need legal advice on whether a short sale is the correct choice for you, please call us at 407-423-1700 to schedule a consultation or email

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