Every short sale situation is unique, so it’s impossible to give a one-size-fits-all definition. However, there are some factors common to all of them that we’ll attempt to explain below.

Short sales are a complex process primarily used by those who find themselves in a financially distressed situation and are seeking to avoid foreclosure in order to alleviate supplementary fees and costs to the creditor and borrower. While short sales have consequences to one’s credit standing, the alternative – foreclosure – is worse still.

Short sales in Ann Arbor and elsewhere typically involve Home sales where the current owner is unable to repay loans and/or liens against the property. So, any proceeds resulting from the sale will inevitably be less than the homeowner owes on those loans and/or liens. 

Creditors in a short sale often not only have to take less than what is owed to them via the debt, but they also sanction the termination of their lien. This is not, however, a guarantee that the homeowner will have his or her financial obligations wiped clean, unless each party agrees to those terms.

Perhaps the only sure thing in a short sale is that before creditors agree to a short sale, they will require proof that the borrower’s financial or economic hardship is preventing him or her from paying the deficiency.

A short sale should not be entered into lightly. A central consideration is the credit impact for the seller; the impact can be significant negative damage to the homeowner’s credit report. Nevertheless, in some situations a short sale is unavoidable because the impact of an actual foreclosure is worse.