Detailed explanation of short sale & mortgage transfer?

I thought a short sale was a bank (or owner ?) selling to an interested buyer before it got to foreclosure. I also heard that if a home owner must leave town, they can get their bank to transfer the mortgage to another person who wants to own it and make the payments. We know someone who must move and needs to avoid foreclosure since they have no money. Thanks.


Clear on assumable. On short sale bank sells to an interested buyer of the house for less than is owed?  Owed by the current owner who is moving out of county and wants to avoid foreclosure. We thought their bank or mortgage co. would sell it to us for less than what they are owed. Ex.scenario, man leaving town still owes $85K from 2008 mortgage. House has structural issues we're aware of. Bank will never get the 85K so they sell to us for $60K, & current owner is out of their obligation.

6 Answers

  • 3 months ago
    Favourite answer

    You are talking about a short sale and a loan assumption, two very different things. 

     A short sale is manner of selling the property below the loan amount to avoid the lenders expense of foreclosure and alleviate the complete debt to the borrower/seller.  A short sale requires lender approval, so the seller/borrower will have to seek the lenders permission first.

    A loan assumption is when seller sells the property to a willing buyer by allowing them to assume their original mortgage rather than originating a loan of their own.  The advantage to that is if the original mortgage holder has a better interest rate and would be able to avoid the closing costs associated with an original mortgage.  The rub is that the new borrower would need to meet the same original qualifications required of the original borrower.  Most people think assumable mortgages are a thing of the past, not realizing government insured loans have been and still are assumable.  But to their credit it is pretty rare, especially when mortgage rates have been dropping.  No one has to leave town.

    Edit:  The owner markets the property, not the lender.  When the seller receives an offer the lender determines if it is acceptable or not, not the owner, IF the offer is under the loan amount.  Short sales can result in great deals to a buyer, but it is not a sure thing. And if you hope to gain a better deal because of poor condition, I suggest you PROVE it in your offer with more than your opinion.

  • 3 months ago

    Short sale is selling for less than is owed.  Mortgages are generally not transferable.  

  • 3 months ago

    A short sale is when the house is sold for less than the amount due (pay off) of the mortgage loan.

    If the mortgage loan is "assumable" it can be transferred to another person.Buyer keeps sellers existing mortgage instead of getting their own.- with low interest rates it's generally better just to get your own loan

    - for VA and USDA loans the seller may be required to keep an "interest" in the loan (meaning they still have money in the loan).

    - The buyer may be required to contribute a hefty down payment if the value of the house has significantly increased. 

  • Anonymous
    3 months ago

    Leaving town has nothing to do with it and there are no mortgage transfers in such instances.  Its not much better or is indeed the same as foreclosure credit wise.

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  • Eva
    Lv 7
    3 months ago

    The transfer you talk about rarely happens. It's called assigning a mortgage. The bank would rather have the new owner obtain their own mortgage. A short sale is when the owner wishes to sell the home for less than they owe the bank. The bank has to approve such a sale as they are forgiving the unpaid balance.

  • 3 months ago

    A short sale is when a home is sold for less than the mortgage balance with the lenders approval.  The lender will go after the home owner for the deficiency balance.  That's the difference between the mortgage balance and what it sold for.  Lately lenders, instead of a deficiency balance, will file a 1099 with the IRS for that amount. There is no assignment of mortgage!

    UPDATE:  The original owner still owes the $25,000 difference!

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