Who benefits the most from a short sale?


Anyone who has been a regular reader of this blog knows that I am not a fan of short sales.  I have represented both buyers and sellers and have some experience.  it isn’t like I am one of those talking heads on the TV who talk authoritatively but they just talk. 

A short sale is when a banks accepts less than what is owed on a home as payment in full.  As you can imagine a short sale looks bad on a credit report in fact it looks almost as bad as a foreclosure.  Usually the seller is behind on the payments.  Some banks will not work with owners who are behind on payments and some banks won’t work with those who are.  Honestly I am not making this up I have witnessed it. 

When a short sale works out and the bank actually allows the sale sometimes the people who benefit the most are the real estate agents involved.   The buyer would pay less for the home if it were a foreclosure.  Sure the sellers credit rating may be slightly better than it would have been if the bank had foreclosed on the loan but only slightly and they still can not purchase a home or get credit. 

To some a short sale seems more honorable than a foreclosure.  In a foreclosure the bank gets the home instead of money, in a short sale the bank gets some money owed but not the home.   Trying to prevent a foreclosure with a short sale is a gamble. There are no guarantees that there will be an offer on the home and if there is there are no gaurantees that the banks will accept the offer before they foreclose.  I have seen many cases where the home being offered as a short sale ends up being a bank owned property while there is an offer on it.   

Before considering a short sale find out how it will impact your credit rating.  Make sure that the bank really is agreeing to a short sale and that means they can not file a judgement later to get the rest of what is owed on the home. 

If you want to prevent foreclosure and can not pay off your mortgage and owe more on your home than it can be sold for contact the Minnesota Home Ownership Center first.