A short sale is a real estate transaction in which the proceeds from a
property sale are less than what is owed on the property. A short sale
occurs when the borrower is unable to fulfill his or her financial
responsibilities to the lending firm, and the lending firm decides
selling the property at a moderate loss is a better alternative than
attempting to acquire the funds from the borrower. Often, a short sale
is used to avoid a foreclosure, which negatively affects both the
mortgage firm or bank in the way of large fees and the homeowner with
poor credit scores.

What a bank looks at when approving a short sale:

The bank or lending institution considers a variety of factors in
determining if a property is suitable for a short sale transaction.
Banks often implement an NPV (Net Present Value) test when considering
a property for short sale. An NPV test assesses several items,
including the cause of the borrower’s financial hardships (i.e.
unemployment, divorce, or illness), and whether or not lien cosigners
are liable for the remaining balance.

In addition, mortgage firms and banks examine the
cost-effectiveness of repossessing the property and selling it through
a foreclosure sale, assess whether the borrower’s situation warrants a
loan modification verses a short sale, and determines whether Fannie
Mae and Freddie Mac own the loan.

How to negotiate a short sale:

When negotiating a short sale on one’s property, persistence is
important to achieving that end. According to lending expert Frank
Shamoo of OC Direct Lender, a bank’s loss mitigation department is
going to have plenty on its plate, so making sure a homeowner’s
information is in the hands of the right people is key. At OC Direct
Lender, Frank Shamoo and his team of Short Sale Mediators provide
expert advice on negotiating with bank asset managers. Visit
www.ocdirectlender.com for more information.