Friday, March 18, 2011

Short Sale Overview

Most real estate sellers, buyers and investors understand what a "short sale" in real estate means. It is not a new concept and simply means that there are not enough proceeds from an anticipated sale to payoff the existing liens and encumbrances.  However, many people do not realize that the methodology to obtain and approval changes as does the terms that a lender may require in order to approve a short sale.

There are business cycles that affect whether a short sale will be approved.  Lenders have different times when they are more amenable to a short sale.  There are many reasons for this, but the short version of the story is that a lender is a business, just like anyone else and there is a business cycle to the lender's revenue and profit.  My experience indicates that these business cycles are in six month intervals for most lenders. This means that is they are not amenable to a short sale today, they may be in six months.

Of course there are many more variables and this is a general overview. A lender will look at the value of the real estate, the market in the particular area, the seller's financial situation and other details.  Frequently, a lender will change their emphasis in determining whether to accept a short sale.  Sometimes it is the property itself while other times (and other lenders) will focus upon the seller's financial status.  This is why it is essential to seek guidance from an experienced  short sale expert.

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