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THE SHORT SALE

The "Short Sale" can enable Home Owners  avoid the Foreclosure process.

Many Home Owners today have found themselves in a position where they owe more than their house is worth in today's market.  In this case it is best not to wait until it is to late.  There is a solution...

Understanding Foreclosure

Pre-Foreclosure

In Florida, when a homeowner misses 3 mortgage payments, generally the lender will mail a letter to alert the homeowner that unless a payment is made, the home will fall into a “pre-foreclosure” status where foreclosure procedure is initiated. At this point, the lender files court action and records a notice of a pending lawsuit (Lis Pendens) against the borrower. The lender notifies the borrower and any other affected parties in person or in some cases by mail or publication. If the borrower does not respond to the court action within a specified amount of time, the county clerk can find the borrower in default and the lender can ask the court to make a final ruling. If the court rules against the borrower, the ruling will include the total amount owed to the lender and the foreclosure sale date. The borrower can stop the foreclosure up until the date of the sale by paying the total amount owed to the lender.

Notice of Sale / Auction

The sale date is typically 20-35 days after the court ruling, but this may vary depending on the individual court. The clerk of court issues a notice of sale containing the location, date, and time of the sale. The notice is published once a week for two weeks, with the second notice appearing at least five days before the sale. Within 10 days of the sale, the clerk transfers ownership to the winning bidder if no one disputes the sale. In most instances, a borrower has no right of redemption after the certificate of sale is issued. At this point, the homeowner has lost his/her home to foreclosure, their credit will show a foreclosure for the nest 10 years and the foreclosure does NOT mean the homeowner is free and clear of the debt that is owed. The entire process from the time the homeowner misses the first payment to the day of the auction is typically about five months.

The Short Sale

The Short Sale is when the lender, prior to the home being auctioned off, agrees to a lesser amount than it is owed, and agrees to accept this amount without further action to the homeowner. This is easier said than done. The lender must be convinced that the homeowner has done due diligence in trying to sell the home, he/she must show they can’t afford the payments and have a reason satisfactory to the lender. Financials must be prepared on behalf of the homeowner, contracts, bank statements and various other documents as is required specifically by each lender. If the lender agrees to the amount proposed in the short package, then the sale is made at the lesser price, the foreclosure is avoided and the remainder of the unpaid mortgage balance is excused by the lender. This acceptance of an amount which is less than what is owed the lender constitutes the “Short Sale”.


There are generally three options that the homeowner can take when faced with a foreclosure:

Option 1

Refinance – It may be possible to refinance your home. Yes, the interest rates are probably higher than what you are currently paying, but if you can afford the higher payments, you may be able to refinance your mortgage to pay off the foreclosure, existing debts and even end up with cash.

Option 2

Bankruptcy – Once the lender files the “Lis Pendens”, homeowners will most likely receive offers to help you file bankruptcy. But would this help you in the long run? Bankruptcy is not a cure-all that will save your home; it will only postpone the inevitable. Be aware that if you file bankruptcy, your home could still go to auction, thus resulting in both a bankruptcy and foreclosure against your personal credit. Bankruptcy delays the foreclosure because a lender can’t auction the home until the bankruptcy debts with creditors is resolved. Bottom line is, if you don’t pay the mortgage, you don’t keep your home; otherwise everyone would file bankruptcy, stop paying the mortgage and live mortgage free for the rest of their lives.

Option 3

Sell Your Home – Many people in foreclosure cannot refinance. The good news is that up until the day of the home auction, you have the power to sell and avoid the foreclosure. We at Indigo Realty have a team of professionals, and a network of investors and specific buyers who are looking for homes at wholesale prices. Our combined resources assure you a service commitment that prevents your home from going to auction thus avoiding foreclosure altogether.


Not the End of the Road - Going through a foreclosure is rough, but there’s light at the end of the tunnel. We specialize in helping our customers repair their credit history and qualify again for a mortgage on a new home after just a short time, perhaps as soon as a year. Some times, bad things happen to good people, not because they’ve done anything wrong, but because they are just having a bad season.

To best explain the process of a short sale, an overview of the foreclosure procedure will give you insight to what is referred to as “Short Sale”.

MARKET CONDITIONS AS OF OCTOBER 28, 2007

Palm Beach County is experiencing a record number of Foreclosures.  Last week there were 201 new foreclosure filings for the week.  Our inventory of homes for sale is at a record high and the homes that seem to sell are those which are well priced.  Clearly, prices are falling.  Many homeowners have found themselves in a position where they cannot refinance from escalating adjustable rates into a fixed rate because the market value of their home is lower than their loan amount.  In order to cut their losses, most lenders are now allowing more flexible "short sales" to home owners in trouble.  In a "Short Sale" the properties are often sold for 80% of the current market value.