Short sale is a real estate transaction with the sale price less than the remaining balance on the mortgage – that is, the sale of a house at a loss, realizing its negative equity.
If other options are not available—a homeowner is unable to qualify for a refinance or loan modification due to loss of income or a high debt-to-income ratio—a short sale may be the last alternative to avoid foreclosure.
Similar to an ordinary sale, but with the acknowledgment of the bank that no other option exists, the home is listed with a real estate agent and the sale proceeds as an ordinary sale would. The bank needs to approve a short sale, and to see supporting documentation regarding your financial cirucumstances.
It is important to be aware of the possibility of a “deficiency judgment,” wherein the mortgage holder can sue for the difference between the amount of the proceeds and the amount outstanding on the loan. Your attorney should insist on a deficiency waiver in a short-sale agreement.
At Todd Murphy Law we can help in this process, negotiating with the bank to obtain approval for the short sale, ensuring that the application is complete, and negotiating a waiver of deficiency.