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Short Sale: A Foreclosure Option

A short sale is one foreclosure option.

A short sale takes place when a homeowner reaches an agreement with an investor to purchase the home for less than its full value. The bank then approves the sale and allows the home debt to be settled for less than the full amount owed.

A short sale is reported as a negative mark on a person’s credit score. However, it is much less harmful to have a short sale on one’s record than a foreclosure.

Foreclosure Options & The Real World

On paper, this short sale foreclosure option seems like a win-win-win. The homeowner gets out of an upside down mortgage. The investor gets a property at a discount. And, the bank no longer has to service a troubled loan.

In the real world, this does not always work as smoothly as it might seem.

For one thing, lenders simply aren’t equipped to handle the volume of short sale proposals coming through. Many times lenders will indicate that they support a short sale only to have the deal fall through because the bank won’t give final approval in time for the investor to make plans.

Other times, rookie (or even experienced) investors tout the short sale foreclosure option to distressed homeowners, but they themselves do not have the financing in place to fund such an avenue.

A sure recipe for disaster is when the lender is dragging its feet and the investor is trying to line up financing at the same time.

Foreclosure Option & "Get Rich Quick" Quicksand

Another failing in the short sale foreclosure option is that many investors have been sold a “get rich quick” bill of goods. These inexperienced investors are chasing the “next big thing.” Because they do not have the contacts at the banks, the industry knowledge, or the financing in place, they’re ripe for failure.

The short sale foreclosure option looks good on its face. However, 95% of short sale offers fail to result in a closed deal. A homeowner who wants to have a successful short sale should make sure that the investor:
• Has the knowledge and experience to pull this off
• Has several short sales already completed and approved
• Has the financing in place to pull off the deal and doesn’t have to go get approval from someone else.

There are many ways to find a short sale investor. I recommend finding an institutional investor who specializes in short sales. One such investor is American Equity.

American Equity is a private lending group. When you contact them and fill out a simple form, a counselor will call you back within 24 hours. If they decide they can help you and want to work with you, they will put their considerable resources toward making you one of the homeowners who is actually able to close a short sale.

What are your best foreclosure options? Well that depends on your circumstances. But, if you can complete a short sale, sometimes it’s your best foreclosure option.