What is a Short Sale Anyway?

As foreclosure rates continue to grow, more and more sellers are turning to short sales as a way to avoid foreclosure.

Some of you may be thinking, "What is a short sale?" and "How does a short sale work?"

In a short sale, the seller negotiates with their mortgage lender to accept a price that's less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn't have to go though a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property.

Sounds good right? Well, there are a few things that you should be aware of...

Sellers need to be aware of the fact that a short sale may still damage their credit, though probably not as much as a foreclosure. Also, lenders typically will only agree to a short sale if the seller is behind in their payments and has received a default notice. There is a lot of paperwork and negotiation that will take place. So be ready for information gathering and a process that may get dragged out quite a bit. But, just remember, in the long run it is better than foreclosure!

Buying a short sale can be a brilliant move, providing you have the patience to deal with the seller's lender. Buyers need to remember that the lender doesn't really want to receive less than what is owed against the property. But lenders don't want to go through the hassle and expense of foreclosure and taking the property back, either. Be prepared for many delays and weeks of not hearing a word from the lender. Shrewd negotiation can mean big profits to a savvy home buyer. So, hang in there!

Short Sales have become very popular in this market. So, don’t be afraid of them. Just make sure you work with a real estate agent that has had experience with short sales. Short sales offer a great opportunity for both buyers and sellers.