What Is a Short Sale?
By Douglas Jacobs, California Bankruptcy Attorney on Aug 30, 2007 in Foreclosure Issues
Many realtors talk about “short sales” to aid a homeowner who can’t get enough money out of the sale of their home in today’s market to pay the liens. A “short sale” is an arrangement made with a mortgage company to take less than what is actually owed.
Thus, if a home has, for example, a first of $200,000 and a second mortgage of $100,000 but will only bring $280,000 on the market, the homeowner can only sell it if the mortgage holders reduce the amount owed by $20,000 (not accounting for costs of sale).
Sometimes this makes a lot of sense. For example if the first mortgage in the above example is about to foreclosure, the second mortgage holder might get completely wiped out. Better to take $80,000 or even $60,000 than end up with nothing.
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