1. Define Short Sale?
A short sale is a form of pre-foreclosure sale and occurs when the mortgagee agrees to accept less than the loan amount to avoid foreclosure. A negotiated short sale results in a discounted purchase price for the retail buyer and usually saves the bank money not following thru with the foreclosure.

2. Why did my mortgage company send me my mortgage payment back?
After your mortgage company accelerates your loan, they no longer accept a payment less than the full amount due. They are likely to send it back, asking for the whole amount.  The reason for this has its origin in case law.

3. What happens to seller's credit when they short sell their property?
What typically happens is the loan will show up as "paid" on their credit report; however there will be a notation that says "settled for less than originally owed" or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.

4. Can an owner profit from a Short Sale?
The seller is not allowed to profit (monetarily) from a short sale.

5. How do bankruptcies affect the possibility of doing a short sale?
Mortgagees won't consider a short sale if the owner is in bankruptcy because trying to negotiate a short sale payoff is considered collection activity. Collection activities are prohibited in bankruptcy.

6. What documents are included in a Short Sale package?
Documents depend on the lender and each lender has different requirements. It is typical they will require a homeowner hardship letter, original purchase contract and the Short sale purchase contract, estimated settlement statement (HUD 1), net sheet, pay stubs, bank statements, personal financial sheet (monthly budget) and other documents depending on the lender.

7.  Do mortgage companies do an appraisal on a short sale?
All lenders order a B.P.O. (Brokers Price Opinion) or full appraisal of the property before making their decision to accept or reject a short sale offer. It’s the only way of assessing the property value.

8. How late in the pre-foreclosure process can you start a short sale?
Allow a window of at least 30 days prior to the auction sale date to start a mortgagee approved pre-foreclosure short sale. Less time will call for more drastic measures and more co-operation.

9. Will banks allow a short sale when the owner has equity?
If a property has what the lender would consider a substantial amount of equity, chances are they would consider allowing the property to foreclose and then resell it closer to the retail value to regain the monies they incurred during the entire foreclosure process, attorney’s are not cheap.

 The short sale of real estate is not a questionable practice in today's softening real estate market, it’s a necessity. The short sale transaction is legal and a much more beneficial alternative to foreclosure or bankruptcy. Lenders are motivated to accept short sale offers for a number of good reasons. The short sale can result in a win-win-win situation for all parties:

Win #1 Owners: Owners win by getting out of a financial predicament, a clean transaction and a salvaged credit score. Your property is saved from foreclosure, thus helping you to save your credit rating. Allowing your home to proceed into foreclosure may adversely affect your credit for up to 7 years.

Win #2 Lenders: The lender wins by avoiding costly expenses of foreclosure proceedings which could lead to even more costly expenses of ownership of the real estate for the lender.

Win #3 Buyers: The buyer of your property wins by getting a solid property at a good market value, possibly with equity.