Short Sale
What is short sale and short pay?
In the world of real estate and financing, they use a lot of jargon that confuses us because of their counter-intuitive meaning. Thus, here is a simple non-professional explanation of a short sale and short pay.
First let me give you an example. Mr X bought a house for $10. Mr X paid $2 as down payment and financed $8 dollars from bank Y. Now Mr X cannot afford payments on his mortgage and decided to sell the house. Given the market condition, the house would sell for $5.
Mr X would contact the bank Y and inform them about his situation. Then, bank Y would approve of Mr X’s intentions. Mr X would put the house for SHORT SALE, which mean the value of the house ($5) is less than the loan amout ($8). Thus, once Mr X sells the house with the cooperation of bank Y; bank Y would be receiving a SHORT PAY, which is $3 dollars less than Mr X owed bank Y.
Here’s the formal definition:
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. [1]
In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower’s financial situation.
If you find yourself in that situation, do not dispare. As an experienced and certified by the National Association of REALTORS® in short sale listings and negotiation, I have the tools and knowledge to save you from the financial distress and assiting you in finding an end to your nightmare.
Please feel free to contact me and I will give you a free assessment of your situation and assist you in through the process if you want.
Michel Whang
Office: 323.671.1282
Direct: 323.683.3253
Agent DRE license 01860872
Prudential California Realty – Los Feliz
1714 Hillhurst Avenue
Los Angeles, CA 90027
