A Short Sale is a
process during a pre-foreclosure procedure, whereby the bank will accept a
lower percentage amount of the face of the loan, as well as deduct the interest and penalties, due to the financial hardship
of the homeowner.
These houses are generally owned by people who have purchased their home with little, or no money down, or own homes that are in areas that are very slow to appreciate. They are also homes that are distressed to the point of value depreciation, or cannot be compared to other homes in the area because of the disrepair.
This is the way it works: Upon request, the bank
foreclosing on Bill’s home will send him an application to apply for a Short
Sale. On this form, he will state his particular financial hardship. The bank
will then, in most cases, send out an appraiser to determine the market value
of the property. If the appraisal determines the value of the home is
considerably less than the face of the mortgage note held by the bank, and
after final review of the homeowner’s particular hardship, the bank will
usually accept anywhere from 30 to 50 percent less than the amount of the face
of the loan, and deduct any interest and penalties due.
Every mortgage
bank offers this process with homeowner loans. The division of a mortgage bank
is called loss mitigation. Each bank’s loss mitigation department works differently from state-to-state. But
the one common thread country wide is that all banks want to recoup as much
money as possible and avoid getting stuck with a bad loan.
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