Pagosa Source – Pagosa Springs Real Estate
Harold Kelley Loher Suellen Mike Heraty Lauri Heraty Robin Curvey

Short Sales

A short sale in real estate occurs when the outstanding obligations (loans) and cost of selling are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with lender.

However, not all short sales are approved. Eligibility criteria for short sales vary depending on specific lender and investor guidelines. If you are considering a short sale, here are a few things to be aware of.

General guidelines for eligibility are:
1. Your payment is delinquent or could be in the foreseeable future. Many lenders will not work with homeowners who are successfully making their loan payments. It is best to check with your lender on their specific policy.
2. You have a qualifying hardship. Examples that qualify are divorce, loss of a job, medical bills, effects of a bad economy etc.
3. You have no major assets (401Ks or IRAs are typically an exception). Lenders who see homeowners with large bank accounts or assets are in most cases less likely to
approve a short sale.

Short sale vs. Loan Modification

Consider a Short sale if:
Unemployed or significant reduction in income
Loans greatly exceed value of the home.
Have failed at loan modification
Here is a quick checklist of some of the things to consider in deciding whether to loanmodify or short sale your home:

Consider a Loan Modification if:
No major change in income
Want to keep the home
Only need the loan's interest rate or term altered (i.e. do not need principal reduction banks are not generally doing principal reductions)

The benefits of doing a short sale are both immediate and long term:

Short term Benefits:
Less damage to credit ( which may impact a variety of things such as the ability to secure a rental home, retain credit cards at lower rates; obtain financing for cars).
Lower rates on insurance
Clearing employment background checks
Retention of employment
Stigma of foreclosure is avoided
Predictable move (rather than unpredictable eviction)

Long term Benefits:
Quicker recovery of credit
Ability to apply for a mortgage in 2-3 years vs. 5-7 years for a foreclosure
While many traumatized homeowners find it hard to imagine owning a home again, the truth is most will. The more quickly a homeowner can recover and re-enter the housing market, the higher the likelihood of obtaining a home at today's lowered values.

Like most guidelines, these criteria are in constant flux and depend on your particular circumstances. Please feel free to contact us at 970-264-7000 discuss your unique situation. If you would like, you can e-mail Mike Heraty directly at

If you are interested in looking at potential short sales or foreclosures for purchase, see our article regarding "Foreclosures & Short Sales" for more information about Pagosa Springs Foreclosures & Short Sales that may not be currently on the market.  Learn about our unique program to help you identify these properties ahead of the properties actually entering the MLS.

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