What is a Short Sale and When it Makes Sense

If you are faced with an inability to manage your payments and bankruptcy is not an option then you have one of three choices:
  1. Do a Loan Modification A process where the lender may defer the interest (which goes on the balance of the loan) or writes down the balance by about 10 20%. But you would have to re-qualify for the loan.
  2. Sell the Condo through a Short Sale   also called "Short Pay", is a process by which a lender agrees to receive a lower amount of an owed debt in exchange for the sale of the property to a third party, usually at no cost to the borrower.
  3. Rent Out the Condo Get a renter in the condo, but it will only cover about half the cost to service the condo.


Given the situation, unless you expect  things will turn around dramatically in a year or you want to keep the condo at any cost, I strongly recommend you sell through a short sale. For these reasons:
  • You get rid of the stress and emotional burden by erasing a debt you cant afford
  • If you cant see yourself making payments again in a year you are only delaying the inevitable
  • The debt forgiveness is temporarily non-taxable income (normally it is taxable by the IRS)
  • There is little to no cost to the seller the lender will cover all selling related expenses
  • You will avoid foreclosure and that will have less of an effect  on your credit history 

What are the Causes or Warning Signs You Should Consider a Short Sale

  • Typically when someone is at the point of not being able to afford their home due to:
  • High interest rates cannot refinance 
  • Decline in property values 
  • Going through a divorce
  • Loss of employment
  • Decrease of income in a self employed business
  • Unexpected expenses

How a Short Sale Appears on Your Credit Report

Building specialists may know the floorplan, but do they know how to find the buyers that are looking for your condo? Most of the time, a building specialist will only market your listing to other people in the homeowners who might be interested in selling their condo. Some inexperienced building specialists might have a lot of listings but don't sell but 1 in 10 of their listings. Know a specialists stats. When employing a building specialist ask these questions:

  • If you have several listings, how will you differentiate my listing from someone else's listing? 
  • What activities do you use to reach apartment owners and buyers who are most likely to buy my condo? 
  • What is your online marketing plan? 
  • What are your statistics? 
    • IDays on Market for your listings 
    • What percentage of your listings actually sell? 
    • How many units have you sold?