What is a short sale and do I need to sell my house that way?

Not to go off on a tangent, BUT a short sale is a trick the banks used to get more revenue for themselves and it can hurt you if you’re not careful.

Let me explain “what is a short sale” first. A short sale is an agreement you create with the bank that SERVICES (I’ll explain in a minute) your loan to pay off the loan for less than what is owed on the balance. The bank orders a drive-by appraisal of the house. You fill out a bunch of papers and start selling the house. Any offers you get is sent to the Bank. If they agree to the sales price, you sell the house for the agreed price and the bank gets all the proceeds. You work out the closing costs with the buyer yourself usually.

Here is the part many don’t tell you. In a short sale, the bank can get a judgement against you for the unpaid balance of your loan. If the house sells for $80,000 and your loan balance was $100,000, you MAY owe the difference. We have helped a number of families that could not sell their house on a short sale because the process was so aggravating and long.

We were in trouble many years ago in Warner Robins Georgia as many of you were during the housing bust. Our bank out of Perry would not attempt to modify our loan (which I found out later is a requirement for loan servicer’s in Georgia). They only sent me “short sale” papers for over a year and that was not what I wanted to do. I finally gave up and filed Bankruptcy. After many years of learning and research, I learned what not to do and learned how to help you too!

After researching and talking to a lot of sources, the general theory is that banks never wanted to modify these loans. WHY? Because the loans are sold to investors in HUGE Packages (Bond Notes) and the bank you went to in order to get the loan only gets the origination fee and a monthly servicing fee. SO, It was thought the banks would make more money in origination fees of the new loans buyers got when these houses sold or foreclosed then they would have on monthly servicing of the old loan to the current homeowner. Since the servicers (banks) were in control of the loans, they could push the direction they wanted. Thousands of houses every month changed hands for 5-6 years. That’s a lot of new loans.

NOW, One trick to getting out of a short sale without owing the bank is this; READ THE CONTRACT! There is a part in the agreement of the short sale that says the proceeds of the sale IS NOT the sole recourse of the loan. It should say that they accept the sales price as full and complete “liquid damages”. Basically it should say they accept the sales proceeds and they will not come after you for the rest.

The best trick is to not do a short sale unless you just love paperwork and lots of phone calls to a bank that thinks of you as a number. There are much easier ways to get out of a house that is more than you can afford or won’t sell fast enough. We solve real estate problems like this every month from Hawkinsville to Macon Georgia. Selling a house you don’t want only takes one phone call or click. Right here… CLICK.