What Is A Short Sale

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's mitigation department. When the home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of the sale of the property.

Certain circumstances help decide whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.
A short sale typically is done to prevent a home foreclosure but the decision to proceed with a short sale is decided on the most economic way for the bank to recover the amount owed on the property. Sometimes a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are many costs that are associated with a foreclosure.

It is a good idea to speak with your mortgage lender prior to selling your property. Let them know your are having a hardship and are thinking of selling your property with the help of a REALTOR®

A REALTOR® can help you determine if your property is a short sale. REALTORS® have access to the latest market information and homes sales in your area.