Home > Facing Foreclosure > Short Sale Seller Myths Debunked

Sellers are often confused and mis-informed during a short sale process. This article is in hopes that the myths are debunked.

In a short sale transaction, the Seller owes more than he/she can sell the property for. For whatever reason, the seller may not have enough money to break even on the transaction - whether it is a decline in property value, income loss or short of finances to pay the cost of selling the property.

When a real estate broker is hired to put the property on the market, the broker signs a listing agreement with the seller. The seller is still the seller, and a responsible party to the transaction. The seller did not sign away the property or ownership rights to the lender. The seller still has legal responsibilities to perform on the contract when the buyer purchases the property.

The seller's lender role in this transaction is only to approve the "short" amount. Hence, "short sale" approval. The property is NOT handed off to the lender like most sellers think. The seller is still the legal owner of the property.

When a short sale is approved, the seller may have additional tasks to fulfill in the contract. All these depends on how the contract was accepted by the Seller. The seller signs legal documents to transfer title to the new buyer. The bank does not. The seller still shows up at the title company.

The seller may have to bring additional funds to the closing, the seller may sign a promissory note for the "short" amount or the seller may just walk away. The outcome depends on the negotiation of the short sale.

More often than not, as soon as the seller signs authorization for the real estate broker to speak/ deal on behalf of the seller, the seller thinks that his/ her role is handed off to the broker. Not the case.

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• Should Your Short Sale Debt Be Forgiven?
• Business Decisions of Short Sales & Foreclosures Create Artificial Real Estate Values
• When Foreclosures Hurt