When a homeowner defaults on their mortgage, typically after missing 3 – 6 payments, there lender will initiate the foreclosure process. Foreclosure is the legal and professional proceeding in which a lender obtains a court-ordered termination of a mortgagor’s equitable right of redemption. In layman’s terms a foreclosure is the legal process a lender must go through in order to take back a property after a homeowner has defaulted on the terms of their mortgage. Banks are not in the business of owning properties, and therefore every bank has some type of Asset Management department specifically for liquidating non-performing assets. So, as a homeowner, foreclosure doesn’t necessarily mean all hope is lost. One of the ways a lender can liquidate a non-performing or bad asset (mortgage) is to allow a homeowner to Short Sale their property.

Simply stated, a Short Sale is when a lender agrees to accept an amount (payment) which is less than the full pay off balance of a mortgage. A lender will consider a Short Sale if that lender feels it is in their best financial interest. The average cost a lender faces by foreclosing on a property is estimated to be around $50,000. If you consider attorney fees, court fees, property depreciation, missed mortgage payments (including interest, insurance and taxes), property maintenance, and vacancy, you can easily see why a lender is willing to accept a Short Sale as oppose to foreclosing on a property.

The qualifications for of Short Sale may vary, depending on the lender. However, the majority of lenders will consider a Short Sale if: