Is a Short Sale Better Than a Foreclosure?

Washington Property Solutions has been doing nothing but short sales since 2003. Even before short sales were in vogue, WPS was negotiating with loss mitigation departments and building relationships with lenders across the country.

As our business has evolved, we find that people utilize us as a resource to discuss their short sale issues. Buyers, sellers and real estate agents alike call us to ask a question or to discuss their entire short sale scenario. We welcome and encourage those calls. Frankly, these are tough issues and unfamiliar territory for almost everyone involved.

Some of the most common questions that we receive are listed below and I have tried to answer them, but please feel free to call for further clarification or with your own questions.

  1. Is a short sale better than a foreclosure?

    The answer to this question depends on each individual’s situation. So before dispensing a definitive answer, please delve deeper into what the homeowner’s future financial goals are with regard to purchasing a house. You should always advise that they consult both a legal and tax professional. If they want to purchase a house in the future, then exploring a short sale is the right path to take. A caveat: if they have only one mortgage you need to be careful, as single mortgage short sale situations raise a whole different set of considerations for a homeowner. In the short sale approval letter, make sure it is a full satisfaction of the debt. THIS IS A VERY TRICKY QUESTION WITH COMPLICATIONS ALL ALONG THE WAY. PLEASE CALL US TO DISCUSS YOUR UNIQUE SITUATION.

  2. How often does a lender issue a lien release only as opposed to a full satisfaction?

    This answer depends on the lender servicing the loan and the investor that owns the loan. The lien holders have two basic choices: lien release or a full satisfaction. A full satisfaction eliminates the ability for the lien holder to pursue any deficiency once the short sale transaction closes. A lien release will allow the property to be sold without paying off the obligations of the promissory note. However, the note is not satisfied. The lender can pursue the remaining debt on the property (sometimes called a deficiency), have a promissory note signed at closing or simply reserve the right to do something in the future. The important thing to keep in mind is that in Washington State, if a property were to ultimately be auctioned off at a foreclosure sale, all but the foreclosing lien holder can still pursue losses resulting from the foreclosure.

  3. Are the commissions determined by the lien holder or the listing agreement?

    The listing agreement has almost nothing to do with what the lender determines the commission will be. Personally, I have seen the lender take commissions down to 4% (total), but I have heard stories of even less.

  4. How long does it take to close a short sale transaction?

    Lenders are overwhelmed with short sale transactions. On average, I would estimate that a transaction can take anywhere from 3-6 months for someone who does not have an established relationship with a lender.

If you have questions about how to best proceed with a short sale, call Richard Eastern at 206-612-5541 or email us.

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