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just what is a short
In real estate terms, a short sale is the sale of a home in which the sale proceeds won't be
enough to pay off the debts secured against the home. Usually when a borrower struggles to
repay the entire amount of the mortgage against the house, the lender will consent to release the
lien against the home and accept less than the amount that's owed.
Any unpaid balance is known as a deficiency and a short sale doesn't release the borrower from
the debt to pay a deficiency unless of course it has been specifically agreed between the lender
and the borrower. California has passed legislation to leave out deficiencies after a short sale has
been approved and this is applicable to both first mortgages and second mortgages. No
deficiencies are permitted after the approval of a short sale. http://www.listings.com
Short sales are used as an alternative option to foreclosure because it results in fewer expenses
to both the lender and also the borrower. Most lenders will require the borrower to show that
because of fiscal difficulties, the borrower will not have the ability to pay the deficiency. Lenders
with liens on the property can include primary mortgages, second mortgages and home equity
credit lines and all of them have to approve the application for a short sale. The application form is
then processed on criteria such as an independent appraisal and valuation of the house and also
the borrower needs to present a strong case that explains why the short sale is important.
Due to the necessity to obtain approvals from all the parties involved, the procedure of negotiation
is complicated and highly specialized. When the lender has mortgage insurance, the insurer will
also become a party to the negotiations making them even more difficult. Homeowners can utilize
licensed debt negotiators who will help in structuring and negotiating the operation of loan
modification. They are required by law to keep borrowers fully informed of the implications of a
A short sale resulting in the reduction of debt is a kind of renegotiation and, if this reduction is
reported to the credit rating agencies, it can have an adverse result similar to that of a foreclosure
on the credit rating. Nonetheless, the Federal Housing Administration has introduced a program
known as "Back-To-Work-Extenuating Circumstances" to help borrowers who ran into monetary
difficulty during the recession. The program is created to assist borrowers with a recent record of
foreclosure or a short sale and recognizes that the credit history may not correctly represent the
ability to pay back a loan.
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