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What is a short sale?

Loansafe.org has an excellent article on short sales:

What is a short sale?

Short sales are an increasingly common real estate practice with a somewhat confusing name. It doesn’t refer to the time the sale takes but that the selling price of the home falls short of paying off the existing loan. In fact, short sales rarely take a short time.

“Short sales take quite a bit longer than regular transactions,” said Heagy’s real estate agent, Brandi Mahon, a certified default resolution specialist with Keller Williams Realty Alternative Foreclosure Solutions.

The added time comes because lenders are involved in the process and must approve a sale after they have determined that the homeowners have a proven hardship and won’t be able to pay the bills.

“Because it takes so long, the home’s buyer may not want to wait that long, and it causes a lot of frustration,” said Mahon, who has handled short sales since 2007. She moved here last year after working in Texas. “I have had some short sales that have taken over a year.”

The concept has “moved to the forefront” over the past three years, as the country seeks to deal with a housing market in pain, said Rookard Real Estate Consultants’ Jack Rookard, who has handled short sales in Lexington. For lenders, he said, a short sale is easier than dealing with the time involved in proceeding to foreclosure and the various fees associated with it.

In short sales, lenders sometimes forgive the difference between the home’s sale price and the loan amount, but others require that borrowers repay the difference.

There are two other common options for homeowners in distress. The first, called deed in lieu, sees property owners sign the property’s deed back to the lenders in exchange for the loan being canceled. The downside for the lender is that it must market the property for sale without assistance from the former owner.

The third option, which has received the most notoriety in recent years, is foreclosure, in which the property is sold to the highest bidder in an attempt to satisfy the debt.

The rest of the article is excellent as well.

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