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How do you sell a property if it's worth less than the mortgage balance? In real estate, a Short Sale is a transaction that occurs when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. Extenuating circumstances delegate whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market (value) and the individual borrower's financial situation. The Short Sale is typically performed in order to prevent an actual foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss as opposed to foreclosing. This is also a very desirable option for the owner who can no longer afford to make payments on the property as the Short Sale does NOT result in a deficiency judgment. In Florida, an actual foreclosure can result in a deficiency judgment against the mortgagor that can be renewed for up to 20 years! This alone makes the Short Sale a much more desirable option. Another major consideration is the fact that a Short Sale is less damaging to your credit score as compared with a foreclosure. Simply put, your credit may be restored much more quickly in the case of a Short Sale. Experienced and specially trained real estate brokers will work with local loss mitigation firms to structure a short sale package for presentation to the lender. The process can be complicated and should not be undertaken by inexperienced real estate agents. Nationally and locally, the number of Short Sales increased dramatically in 2007 and is expected to reach new record levels in 2008. |
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