Home > Uncategorized > The Benefits of a Short Sale….After Foreclosure?

The Benefits of a Short Sale….After Foreclosure?

A short sale  is a sale of property conditioned upon a bank’s  approval of a reduced loan pay off and its agreement to discharge its mortgage.
In a short sale a borrower owes the bank more than the property is worth. A short sale can make sense for both a buyer and a seller.  For more on buying on the context of a short sale – see my guest article posted on Amerifirst Home Mortgage’s Blog site http://blog.amerifirst.com/amerifirst-blog/bid/87723/Mortgage-Info-Buying-in-the-Context-of-a-Foreclosure-or-Short-Sale

From the Seller’s perspective, does it make sense to pursue a short sale AFTER the bank has already foreclosed on the Property?

The answer is a typical lawyer answer:  It depends.

Although it depends upon a lot of facts which I will not go into detail about,  in the typical scenario it largely depends on who was the highest bidder at the foreclosure sale and what amount was the highest bid.

Let’s say  the Property is sold at foreclosure and the mortgage holder, the mortgagee, (the “Bank”) was the highest bidder – it could take one of two paths:  1. it could get an appraisal and make a “credit bid” for what it believes is the fair market value of the Property.  If the credit bid is less than the loan, and they are the highest bidder, they are entitled to a sheriff’s deed in the amount of the bid, plus the ability to pursue a deficiency judgment against the borrower.  In this instance, a short sale would benefit the seller (borrower) if the bank is willing to waive the resulting deficiency.

However, the value to a borrower of obtaining a short sale becomes less clear if the bank makes a credit bid for the full amount of the loan.  In that case, regardless of the fair market value of the property, the bank could not collect a deficiency – because there is no deficiency. Essentially, the Bank took a gamble – they bid the entire amount of the debt and thought that the property might have been valued at or around its debt. The property may be worth less than the bid amount. Because the Bank bid the entire amount of the debt, the mortgage has been discharged and there is no deficiency balance.

Therefore, it is always the case that in a short sale the property is worth less than a borrower’s loan – it is NOT always the case that at foreclosure the Bank bids less than the amount of the loan.

Categories: Uncategorized
  1. December 27, 2012 at 6:25 am

    Great blogging , nice information , this is really a helpful information about the benefits of the short sale after foreclosure. Its very informative information for the borrower or seller

    Brian Linnekens

  2. April 21, 2013 at 9:08 am

    I had a client who wanted to buy a home in Arizona, but he had a foreclosure. After researching the web I found a loan program at http://www.cfsflex.com, they allow a mortgage after a foreclosure. There is no waiting period. Good to see lending options coming back.

  3. May 20, 2013 at 2:20 am

    Economical way of dealing on real state and trusted practice – short sale. Having great advantages after foreclosure.

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