Foreclosures

And Short Sales

 

How does the process work for these types of transactions?

Short Sales

The main purposes of a short sale are to help a financially distressed borrower avoid a foreclosure of their property and help protect their credit rating from deteriorating. For this sale to take place, the following conditions must be met:

  • Borrower must apply and be eligible to participate in a short sale program.
  • Mortgage holder approves the short sale and set any terms as necessary.
  • Mortgage holder approves sales price for property to be listed.
  • Any incoming offers will be reviewed and accepted by mortgage holder.
  • If and after an offer has been approved, the negotiation with lien holders, if any, will be necessary. Lien holders must approve a settlement amount for them to release any judgments and/or deficiencies.
    • Such amount will be less than what the borrower owes.
    • Settlement amount will come from the proceeds of the sale.
    • Please note that if settlement with lien holder is not met, the short sale will not be able to close.
  • Furthermore, if the buyer is seeking any offer negotiation, it must be approved by the mortgage holder.
  • Once all the parties involved have come to an understanding of the details the transaction entails, closing will be successful.

Foreclosures

The main purpose of a property foreclosure is for the mortgage owner to secure a defaulted loan through an auction sale or a repossession of the property. The process starts when the mortgage owner files a public default notice (also known as Notice of Default or Lis Pendens). Then, depending on the state, the process can have one of the following endings:

  • The borrower may pay off the loan that is in default during a pre-foreclosure period, or grace period, determined by state law.
  • The borrower may be able to do a third-party sale during the pre-foreclosure period.
  • A third party buys the property at a public auction at the end of the pre-foreclosure period.
  • The mortgage owner takes ownership of the property. Such ownership can be given through an agreement with the borrower during pre-foreclosure (ex: cash for keys or a deed-in- lieu) or by buying back the property at the public auction.
    • Properties repossessed by the mortgage owner are also known as bank-owned or REO properties (Real Estate Owned)