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Imagine your home is worth $200,000, but you owe $220,000 on it.  If you were to sell it in the open market, you might net $184,000, or $36,000 less than what you need to pay off the loan.  A short sale is where your lender will forgive a portion or all of the short amount and cover the closing costs of the sale including real estate commissions..

Why would a lender accept a short sale?

 A lender will often consider a short sale because the cost and risk of foreclosure is so high.  In order to accept a short sale, a lender will need justification.  Justification might mean a substantial loss of income that would prevent you from paying the mortgage and therefore being forced in a position to sell the home.  Another justification might be that the house is simply worth less than what you owe and you cannot afford to continue making payments

Does the short sale effect my credit?

A Short sale does adversely affect a person's credit report, though the negative impact is typically less than a foreclosure.  Short sales are type of settlement.  Short sales remains on credit for 7 years.  Depending on other credit information, it can be possible to obtain another mortgage 2-3 years after a short sale. 

Who pays the real estate commissions with a short sale?

This is the #1 question I get from my short sale clients.  Essentially, I negotiate compensation with the bank which relieves you, the homeowner, from paying any commissions. 

How long does it takes?

Short sales typically take 30-60 days for approval from the bank.  Sometimes its shorter, sometimes its longer. 

What do I need to submit for a short sale?

Lenders all have different  documentation.  Typically you are required to submit a hardship letter, 2 months of bank statements, and a pay stub.  When an offer comes in on your property,  I will submit your documentation as well as the accepted purchase contract, an estimated statement, and a copy of the listing agreement.  I will also need a letter of authorization from you that will allow me to speak directly with your lender about the short sale.

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