Wednesday, December 13

Short Sale

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In the real estate business, a short sale is not a distinct possibility.  In fact, with the worsening financial crisis being experienced globally, people are forced to compromise their monetary obligations.  But what exactly is a short sale? A short sale occurs when the mortgagor is unable to pay off the loan balance on the property which he had acquired.  The lender, which is usually the bank, instead of forcing the borrower to pay off his monetary obligation, opts to sell the property at a much lesser price than the amount borrowed, where in effect, the loss suffered is minimal.  It actually poses a win-win solution for both parties, since they would avoid the tedious foreclosure proceedings which would entail heavy costs on the part of the lender and at the same time give the borrower the prospect of losing his piece of property and inflict heavy damage to his credit standing which can be quite difficult to salvage.  

When parties go for a short sale, it poses the best economical solution for both parties, since the borrower would be able to have some sort of damage control on his credit rating while the lender will minimize the losses which he should be incurring.  Of course, any agreement reached pursuant to a short sale only affects the loan balance and does not in any manner affect the remaining balance unless both parties provide otherwise.   Nevertheless, the resort to a short sale is being resorted to because it is actually much more faster and less expensive than going through the flow of foreclosure proceedings which can admittedly drag for months or even years, not to mention the added costs and expenses.   Though consenting to a short sale may inflict damage on one’s credit standing, it is manageable when a piece of property is about to be foreclosed.  This is why both borrower and lender agree to this type of arrangement because aside from the fact that it is not that costly, the negative effects are cushioned and controlled.  In this type of arrangement, neither party wins, and neither party loses.  

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