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What is a Short Sale?

How does a short sale work?

4837 day(s) ago

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A short sale is a real estate procedure to enable a financially distressed home owner the chance to sell his or her property at a bargain price, thus enabling the homeowner to walk away from the property without the threat of a foreclosure.

The short sale is the ideal situation for a seller that is several payments behind on the mortgage, and wants to be set free from the mortgage balance. The lender must grant approval for a short sale, and in most cases, proof will be required that the home owner can no longer handle the house payments. And because of the urgency of the sale, the lender may fall short of the total mortgage balance when the property is sold.

To begin the process, the homeowner must do some research and find a well-qualified real estate agent with plenty of experience in handling short sales. The process requires an agent with negotiating skills to set the minimum sale price that the lender will agree to take, while juggling that sale price to offer the property at discount for a quick sale.

A short sale may cause a ding on one's credit rating, but it's much less severe than having a foreclosure on the credit report. The short sale is thus a win-win situation for everyone. The banks will recover all or most of the loan balance, the home owner is set free from the property payments and the buyers just got a heck of a deal. However, one thing to bear in mind if you're considering a short sale is that there will be no monetary gain to the seller. This procedure is an emergency exit for the home approaching foreclosure, so don't expect to make a few bucks in the process.

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