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What Is A Short Sale?
This is a type of sale of a real estate asset that the NET proceeds from the sale do not cover the secured debt against the property. If any lien holder is getting a penny less than the full amount owed then it would be considered a short sale as debt needs to be settled in less than full.
Are There Different Types Of Short Sales?
The premise of what a short sale is on real estate does not change, but there are different types of programs that mortgage servicers and investors on the note may offer. The government also has and may be offering various programs depending on the state and loan type. The mortgage servicers uphold the guidelines of the the investor on the note or potentially the mortgage insurer. The mortgage servicer has a servicing agreement to service the loan and has certain guidelines to follow for the party they contracted with. They may be delegated to make certain decisions on behalf of the investor depending on the scenario.
Mortgages who have Fannie Mae ( FNMA ), Freddie Mac ( FHLMC ), VA, FHA, Private Investors, and many others, have guidelines that may differ.
Depending on state guidelines, deficiency judgments may be allowed. The goal of a short sale in a deficiency state is to get this balance settled in full so a borrower does not have to worry about being pursued. Some states, investors, and insurers do not allow for deficiency judgments. An estimation of a deficiency balance an be calculated by taking the Payoff figure and subtracting the NET proceeds received by the lien holder in question. Generally on an approval letter for a short sale it will state if there is a deficiency balance or not, but ensure to do research.
These are only a few important pieces of information when it comes to these transaction types. There are many potential repercussions to a short sale when it comes to credit, deficiency, and taxes. The same applies to a foreclosure, but many times the impact is greater with a foreclosure. It’s important to do your due diligence on all of these topics.
If you have questions or need help, fill out the form below or call 1-800-692-9960 and a specialist will be in touch with you shortly.