Real Estate Short Sale
Experienced California Department of Real Estate Agent
Jeff Mertl  805 550-0477

 
What is a Short Sale?

 A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a Broker Price Opinion BPO (also known as a Broker Opinion of Value (BOV)) or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.

 

Glossary of Real Estate Terms
 
Bankruptcy: A legal alternative that allows the borrower to clear any debt obligations by restructuring the payment terms. A bankruptcy stops the foreclosure process until the bankruptcy process is completed or the court allows the lender to resume the foreclosure.
 
Deed in Lieu: Voluntary conveyance of title in exchange for a discharge of debt.  The house must be free of other liens and must have clear title.  In simple terms, the borrower agrees to transfer title of the property to the lender, who accepts the property in exchange for the total debt. 

Deed of Trust:
A legal document that dictates the terms of a loan used to buy a property and transfers the ownership of the  property to a third party called a trustee until the loan has been paid in full.

Default:
Occurs when the borrower does not meet its legal obligations according to the loan terms.

Forbearance:
Under a forbearance agreement, the lender agrees to stop the foreclosure process and determines payment terms that, at a certain time, will bring the borrower current.

Foreclosure:
A process in which a lender attempts to recover the amount owed on a defaulted loan. The lender has the option of selling the property or repossessing the property. The beginning of a foreclosure process starts after a borrower defaults on mortgage payments and the lender files a Notice of Default or Lis Pendens.

Lien:
A legal claim on a property by a lender or other entity (called the lien holder) against the property owner that owes the money.

Lis Pendens (LIS):
A publicly recorded notice of a pending lawsuit against a property owner that may affect the ownership of a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

Modification:
A transaction in which a lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not cancelled. Changes may include: extending the term of the loan, changing the monthly payments, changing the interest rate, etc.

Notice of Default (NOD):
A publicly recorded notice stating that a property owner is behind scheduled loan payments for a loan secured by a property. This process is required in a few states to begin the foreclosure process if a borrower is in default.

REO (Real Estate Owned):
A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

Reinstatement:
Occurs when the property owner pays off the amount in default to bring the loan payments current in order to stop the foreclosure process and return to the original terms of a loan.

Short Sale:
(Also called "Short Pay" or "Pay Off") A process in which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party.
 


 

How Does it Work??

 short sale
Contact Jeff Mertl for 
a free consultation. 
A specialist will perform an 
evaluation to determine if conditions exist for a 
short sale, loan modification, forbearance or other 
acceptable workout solution.
 
 short sale
We prepare a
  comprehensive short sale package containing the
required documents to be delivered to the lender and delivers the information to Jeff to explain and work with you.




 
short sale 
Jeff Mertl
aggressively market 
the property to generate 
the best possible 
purchase offers.



 
 short sale
When the lender approves 
the terms and conditions of 
the short sale, Jeff Mertl moves forward with the 
closing of the sale between the owner and new buyer.
 short sale
Jeff Mertl aggressively markets the property to 
generate the best possible
purchase offers.

 short sale
We negotiate the 
terms of the short sale with 
the lender. These terms may include the sale price, closing costs and more.

 


DRE# 00981917