Upside Down Mortgage

Mortgage Short Sale

If you are a homeowner with an upside down mortgage, you may want to look into doing a mortgage short sale. A mortgage short sale is sometimes referred to as a bank short sale, a real estate short sale or just a short sale.

What is a mortgage short sale?

A mortgage short sale is a process where a homeowner finds a real estate investor or interested buyer who is willing to purchase his or her home subject to a successful real estate short sale. In most cases, the homeowner, will walk away from their upside down mortgage free and clear. The real estate investor gets to buy the home for what he can convince the bank to accept. The bank usually takes some losses but most of the time the losses they take upfront by accepting the mortgage short sale outweigh the losses they would have incurred if the foreclosure process completed.

Most of the time, the real estate investor will start the mortgage short sale process by initiating the first mortgage short sale, the second mortgage short sale and then the third and fourth, if any. No matter how many mortgages you have, you can always do a short sale if you are upside down on your mortgage and cannot make future payments.

If possible, start a short sale process as early as you can. If you wait until you received the notice of default or the date of the trustee's sale has been set, the mortgage short sale process will be more complicated.

Short Sale Per Diem

If your real estate short sale is going slower than expected and it is now time for the real estate investor to close the deal with the bank, you and the real estate investor will undoubtedly need some extension. In this case, you should have your title company or attorney call the bank and ask for an extension.

What if the bank will not give an extension?

In the real estate purchase agreement, the bank usually has a clause about a per diem charge if the real estate investor failed to close the deal by the closing date. If you are in the middle of a real estate short sale and it is closing time and the bank will not give an extension, then either you or the real estate investor may have to pay the per diem fee. Most of the time, it is the real estate investor who pays the per diem charge because you (the homeowner) is supposed to be in distress and cannot afford anything extra. But, the real estate investor can save some money by calling the bank to short sale the per diem.