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Short sale is the last resort to stop foreclosure

Fri Apr 4, 2008 11:04PM | By Tony

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Before the ongoing real estate crisis, short sale would normally take place after property didn't sell on the auction. Then it went back to the lender which put it for a short sale. Such properties often called REO or real estate owned. Banks basically give them to few designated realtors working a particular area. The sale is called short because banks are selling for a loss, less than property mortgage.

These days, short sale is often used before the auction as the last effort to save credit from foreclosure filing. If and when all negotiations for a mortgage workout fail and you owe more on your house than it is worth, the lender basically agrees to cooperate in the sale and take a loss. You place the home for sale and any offers are first presented to the bank. Unlike a traditional sale when you would decide what offer to take, your bank controls the negotiations and you have no say in the process. Needless to say, there are no proceeds from the sale for you, if by some miracle there will be any at all.

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