I can promise you that it’s anything but a short transaction!

Simply put, a short sale (also referred to as a ‘pre-foreclosure’), involves the sale of real estate whereby the proceeds from the sale fall short of the balance owed on a loan secured by the property.

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship that exists on the part of the owner/borrower.

This negotiation is all done through communication with a bank's Loss Mitigation department. The home owner/borrower sells the mortgaged property for less than the outstanding balance of the loan, and turns over the net proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.

Most Short Sales leave a deficiency balance for which the home owner / borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain to the bank while the mortgage broker, real estate agent / broker, loan officers, title and closing agents fees are covered, for the most part. No regulatory agency governs this hybrid transaction.

Extenuating circumstances influence whether or not a particular bank will discount a loan balance. Generally, these circumstances are related to the current real estate market and the borrower's financial situation. A short sale typically is executed to prevent a home from foreclosure.

Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For a home owner, the advantages of a short sale include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency.

A short sale is typically faster and less expensive than a foreclosure. In brief, a short sale is nothing more than negotiating with lien holders for a payoff that is less than what they are owed; or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Short sales are quickly being re-adopted as a common and standard business transaction for the banks, in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds).

It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults. If you're interested in finding Santa Monica Short Sales or foreclosures please don't hesitate to contact me. I am a certified short sale specialist.

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