What is a Short Sale?

Foreclosure is the bleakest option for both lenders and homeowners. To fend it off, most lenders in Denver have loss mitigation specialists who consult with distressed homeowners to find ways to avoid foreclosure, while minimizing any losses for the lender. Essentially, a loss mitigator acts as a middleman between the lender and homeowner, seeking the best possible alternative to foreclosure. This may result in new mortgage terms, loan modifications, or short refinancing negotiations. But an increasingly common option is a short sale.

In a short sale, the lender allows the property to be sold for less than what is owed on it, meaning they take a loss. Naturally, not all lenders will sign off on this. Several factors are considered. Loan defaultment, demonstrated personal and/or financial hardships (such as job loss or a medical emergency), or a decline in the home's market value (proven with a CMA) can all come into play if applicable. The lender will evaluate the options (can this loan be modified in any feasible way to elevate it from default status?) and weigh the risks (which scenario loses less money ? foreclosure, or a short sale?)

Lenders who approve short sales often do it for practical reasons ? It may just be easier to wash their hands of a property. They lose money but avoid a potentially bigger loss in foreclosure, while scratching a defaulted loan off their books and with it, the hassle of having to pressure the homeowner. Once the homeowner has found a buyer for their short sale property, they can negotiate debt forgiveness on the difference between the final sale price and what was owed