What is a short sale?
A. Many Canadian clients ask us about Short Sales. It is not a term commonly used in Canada. Short sales are pre-foreclosure situations where the homeowner is about to be foreclosed on and in a last minute attempt to keep the foreclosure off of their credit history they try to sell it. The home is worth less than what they owe on the home. The homeowner must get approval from the bank to sell for less than the mortgage amount and ask the bank forgive the balance of the mortgage. There are thus a minimum of 3 parties in a foreclosure: seller, buyer and bank. Usually there are a minimum of 4 as there is also a home equity line of credit on the home too. Sometimes there are property tax liens, mechanics liens, IRS liens in addition to the most common four. All liens must be cleared and/or approve the sale price. This is usually a very tricky situation. Most short sales do not sell. Up to 80% of short sales never close. We advise our buyers to not waste their time as short sales are extrem
From Wikipedia: “A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s Loss mitigation 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 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 climate and the individual borrower’s financial situation. A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages in
