Short Sales are when the Seller of a home owes th bank more than they get in the sale.  They are coming up "short".  To more exact the Seller does not have enough sale proceeds to pay the mortgage(s) and all the closing costs incurred with a transaction.

Sellers contact their lender(s) to try to negotiate a deal to sell the property for less than the full amount owed.  Typically the sellers make this known early on, so Buyers aren't surprised once an offer is written.

We are seeing a lot more of these in the Twin Cities for a number of reasons.  It's good to remember that while on the rise, the number of short sales, or foreclosures for that matter, is still a very small number of total home sales.

Here are some tips for handling a short sale if you find yourself interested in a home in this situation:

- There is no guarantee the Bank will agree to the sale.  Sellers(and Listing Agents) - don't waist your time marketing a home in a short position until you've talked it over with your lender.  They usually won't agree to settle for a specific price, but you need to keep them in the loop.  Buyers(and Buyer's Agents) you'll have expenses like appraisals & inspections etc. that may be hard to recover if the Bank refuses the sale, Keep this in mind as you write your contracts.

- Lenders usually want to see financial statements, appraisals, purchase agreements, HUD statements, and other financial documents before agreeing to settle.  Once a "deal" is struck between Buyer and Seller, then you'll have to prove the case to the lender, make it a solid one!

- Remember you are dealing with a bank, short sales can take 45 days to 2 months typically to work out.  Banks enjoy discussing money, they don't enjoy discussing necessary repairs, or personal property.  Keep the contract simple and straight forward, and plan on doing any fixing up on your own, after the sale.

- If the lender agree to settle it will be for a specific amount, for "the net proceeds" whatever they come to.  So be sure your estimates are as accurate as possible.  You don't want get to closing and find you're still short.

- Requesting a short sales doesn't stop the foreclosure process, that is a separate issue.  Watch the time-line, is a foreclosure sale coming up, will you close before then?

- Get it in writing, if the lender approves a short sale, make sure the contract states the amount the lender is demanding and that full release will be provide upon payment.

- Agents, don't think you commission is invincible, banks will com after you too. Know what you are worth and be prepared to justify your value, or you'll loose it.