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A short sale scenarioInformation Windowarises any time the sum total of debt secured against a property exceeds the property’s current fair market value. This scenario is described euphemistically as being “upside-down” or “underwater.” But, not all property that is underwater can be short sold. In a short sale, one or more secured creditors (as necessary and appropriate) agree to accept less than the debt owed in order consummate the sale transaction. In general, a creditor’s willingness to accept less than what is owed is conditioned on two factors:

A short sale scenario has two common causes - (i) market forces cause a property to decline in value to such an extent that otherwise reasonable debt obligations nevertheless exceed its value; and (ii) seller acts or omissions result in excessive debt obligations. With regard to the latter cause, the total debt obligation typically involves both consensual and non-consensual liens.

  • The seller lacks the means to pay the debt in fullInformation Windowat the time of closing; and
  • The seller has a hardship (e.g., loss of income, forced relocation) that creates an immediate need to sell the property.

A seller with sufficient means to pay secured debt in full at closing and/or a seller who does not have a hardship driven need to sell may be denied a short sale. In addition, a seller deemed to have adequate future income potential may be asked to sign a promissory note as part of a short sale, which note obligates the seller to pay back some or all of the deficiency balance over time after closing.


Of course a creditor accepting a short payoff will generally seek independent confirmation of the fact that secured debt exceeds the fair market value of the property…



   Short Sale Division Guide to Short Sales

   Fees (Unified Title Company LLC / Unified Title Company of Northern Colorado, LLC)

   Short Sale Tips & Tactics