Glossary of Short Sale Terms

Absolute Auction an auction with no minimum bid amount, the highest bidder gets the property no matter how low the bid.

Accrued Interest interest accumulated on the mortgage since the last payment.

Action the ‘notice of’ is the published legal beginning of the demand for payment in a foreclosure proceeding.

Appraisal an opinion of value.

Assessed Value Value placed on property by the county for the purpose of computing real property taxes. In Florida the assessed value is usually 15-20% below market value but will vary by area.

BPO Broker’s Price Opinion also called a Comparative Market Analysis. This is a method of appraisal in which selling prices of similar properties are used as the basis for arriving at the value estimate. Institutional sellers usually rely on a BPO prepared by a real estate agent and a professional appraisal to determine a listing price.

Deed in Lieu this is also called a “voluntary foreclosure” In some cases, the bank will take the home back “in lieu” of foreclosure. The bank may make it sound like it is in the best interest of the seller to do a deed in lieu. A voluntary foreclosure will reflect as poorly on a credit report as a foreclosure. A short sale is still typically better option for the seller.

Default Judgment filed against someone because they failed to show up in court.

DeficiencyJudgment decision requiring a borrower to pay the lender the difference between the mortgage balance and the amount realized at the foreclosure sale.

Forbearance also called a “payment plan” this is a process that rarely works in favor of the seller. The bank agrees to not foreclose as long as the seller meets new loan terms. This may mean bringing the loan current (paying thousands of $$ to do so) and an increased payment. Banks know that most sellers will eventually default again. This is just a way for the banks to get more money from the seller before the foreclosure.

Foreclosure forced sale of property ordered by a lender due to delinquency in mortgage payment. A foreclosure sale terminates all rights of the mortgagor.

HUD abbreviation for the Department of Housing and Urban Development, an agency which oversees FHA - FHA foreclosures are called HUD Homes.

Involuntary Lien a lien imposed against property without the owner’s consent such as taxes, special assessments, federal income taxes, etc.

Junior Lien a lien that does not have first priority making the property security for payment of a debt.

Lien is an encumbrance using the property as security for the payment of a debt or obligation of the property owner.

Lis Pendens lawsuit pending – this is usually recorded in Florida to give constructive notice of pending litigation. Usually after 3 missed payments.

Loss Mitigator is the person at the bank that you will most commonly be dealing with. The loss mitigator negotiates the short sale on behalf of the lender. They are professional negotiators.

Market Value the price a property will bring in the open market under normal conditions.

Net Sheet often a lender will ask for a “net sheet” this is the same as a preliminary HUD1 or preliminary CLOSING STATEMENT.

Pre-Foreclosure a home is in “Pre-foreclosure” from the time that the bank files a lis pendens to when they actually take the home to auction.

REO stands for “Real Estate Owned” A bank will attempt to auction off properties that they foreclose on. When a property at suction fails to get sold, it goes back to the bank as an REO. These homes are then sold through a Realtor of the open market.

Short Sale negotiating with a Lender (Lien Holder) to accept an amount less than what is owed on mortgage balances.