What is a Short Sale?
A Short Sale is a real estate transaction in which the revenues from the sale fall short of the balance owed on a loan secured by the property sold. Short sales have become the order of the day due to the financial hardships experienced by homeowners whose mortgages are upside down and can no longer make their mortgage payment for one reason or the other. Instead of letting the bank foreclose and ruin their credit, homeowners are now opting to do a short sale.
Who Benefits from a Short Sale?
After a short sale, the home is sold to the buyer and the seller walks away without any cash from the sale; all proceeds go to the lenders and other creditors on title. The main advantage of a short sale to the seller is that he/she can avoid owing the balance of the loan and also get to avoid the long term negative consequences of a foreclosure on their credit.
The buyer’s advantage is clearly the prospects of getting their new home at a significant discount compared to what they might have paid for it a few years back. Buyers should be aware that the short sale process often takes time and are required in most cases to purchase the property as is. In the end, the reward for being patient is a new home at reasonable price.
Mortgage lenders benefit as well, they avoid the cost of a lengthy foreclosure process. Most lenders will agree to a short sale if the seller can prove that they are financially insolvent and also if the lender is made to see that it’s in their best interest to take the discount now instead of taking the property back after a foreclosure and then trying to sell it for less than what they can net right at the moment if they approved the short sale.
