What is a Short Sale?

A short sale in real estate occurs when a property is sold and transfered for less than the total obligations (mortgages) against the property. Short sales allow a homeowner to avoid a foreclosure, but may expose the homeowner to tax consequences.

Short sales pose a challenge for buyers in that their offer has to be approved by the seller and the seller's mortgage holder(s). As the bank will be taking a loss, this process often takes a considerable amount of time before an agreement can be reached.

Due to the substantial number of homes already in foreclosure, many banks simply do not have the staff to handle short sales transactions. As a result, many of these deals are not approved, or the time delay causes the buyer to find another property.

On the positive side, shorts sales can offer great deals to the buyer who has the patience to go through the process.