What’s the difference between Short Sale vs Short Payoff?
In our current real estate environment, here in Western Massachusetts, it is crucial that buyers and sellers fully understand the difference between a “Short Sale” and a “Short Payoff”.
A Short Sale is where the lender or investor agrees to accept an amount less than actual owed on the property. The Criteria for a Short Sale are that the borrower demonstrates a verifiable long term hardship.
A Short Payoff is when the lender agrees to release the lien (their interest) on the property and allow the property to be “conveyed” to a new owner. The lender agrees to accept less than the amount owed on the property to release the lien however they extend a certain amount of “credit” to the borrower in the form of an unsecured line of credit or promissory note.
The Criteria for a Short Payoff – The mortgage is current, the borrower has great credit, the borrower had and can demonstrate the ability to pay off the debt. When would you request a Short Payoff? – You would request a short payoff when the home has lost value dramatically and you do not have the ability to pay the large amount to get completely out of the property. Note – Not all lenders will allow for a Short Payoff, however you will never know if you never ask. Advantages of a Short Pay-Off:
• You are able to move out of the property and get on with your life.
• You SHOULD receive no negative feedback on your credit.
• You may obtain a lower interest rate on the loan. Sometimes 1-2%. If for some crazy reason your ability to pay changes and your client are not able to pay on the note, the credit ramifications are significantly smaller.
For more information on short sales, including who to contact and every states legal information, read my FREE E-book on my website.
Are you a homeowner in the Westfield, MA or Western Massachusetts area who owns a home that is worth less than you owe, but need to or want to make a move? I am here to help! Call Lesley Lambert, The Real Estate Natural at Park Square Realty at 413-575-3611.
