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What is a Short Sale Anyway?

An increase in foreclosure rates will inevitably bring with it an increase in short sales. But what is a short sale?

A short sale happens when you sell your house for less than your remaining mortgage balance, the proceeds of which go to the lender and in return the lender forgives the remaining balance. Selling your home as a short sale is one way to avoid foreclosure.

As a general rule, lenders lose money when they foreclose on a property. Consequently, they would rather not have to foreclose if it can be avoided. A short sale represents an opportunity to cut their losses because a short sale usually allows them to recoup more of the cost of the loan than a foreclosure process would.

However, don’t think that a short sale is an easy thing to accomplish. In order to get permission for a short sale, you must provide documentation showing a genuine financial hardship. And don’t think that the decision for accepting a short sale is solely in the hands of the lender. Sure the lender must first agree, but this is not the final word. If there is mortgage insurance involved, this company also gets input on the decision. If there is an investor backing the mortgage, they also get input as to whether to accept a short sale.

The transaction process for a short sale can be rather cumbersome as well, whether you’re on the buying or selling side. Many short sales fail due to additional demands by the lender, such as requiring the broker to reduce his or her commission and/or that the seller signs a document requiring him or her to pay back the shortfall.

If you’re on the selling side of a short sale, consider having your agent or other experienced professional negotiate with your lender for a better deal. And remember, if the lender does accept a short sale and forgives part of your debt, that is considered taxable income and you must declare it as such to the IRS.

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Tim Tanz, CRS, GRI, ABR
1034 S Brentwood Blvd
Suite 750
St Louis, MO 63117
Phone: 314-974-4886
Email: tim@timtanzhomes.com

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---We trusted Tim so well that we purchased a home through him simply by doing FaceTime with him at an open house. We lived in a different State and couldn't make it in time to a home that was having multiple offers and Tim made sure to put us first, thus guaranteeing our chance to make the successful bid that landed us our dream home!  C. Haven  -- 1201 Dunston Dr, Saint Louis, MO 63146
 
---We have purchased 2 homes and sold 1 home with Tim as our agent. If we have the opportunity to relocate back to the St. Louis area, our first call will be to Tim.  When we purchased our first home through Tim, we didn't know anyone or very much about the St. Louis area. Tim took the time to show us many different areas which was very helpful in making our decision. He was very professional, detailed and walked us through the entire process. He made sure all the little  details were taken care of.  Tim has integrity and will tell you the truth about the market or about your home, even if you don't want to hear it. When we purchased and later sold our 2nd home, we didn't think twice about calling Tim. In my opinion, this one act put Tim way above the rest. During the sale of our last home, we had an issue with our moving company (basically they didn't show up the first day), so we had only one day to get our stuff out of the house and clean it up for the new owners. Tim came over and helped us with patching nail holes and cleaning. Not every agent would do that to help out their client.  G. Allswede – 3476 Covington Parkway.
 
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