Short Sales and Foreclosures are big in the US real estate market now because of both the economy and in general. Even though he US economy appears to be recovering.....it has taken a while in come cases for the effects to be felt.
A Short Sale is when a home is listied for less than it is worth with the lenders approval. There are two main reaons that happens. Either a homeowner is having problems with income with a layoff or something else that is robbbing them of sufficient cash flow. In some cases a Short Sale can happen because home prices in an area have dropped so low that an owners house ends up being worth half of what it was when they bought it.
A foreclosure happens when a homeowner hasnt been paying their mortgage for a long time ..usually 12-14 mo..sometimes sooner than that. The owner is given warning by mail and at some point a few months later the home goes to auction. Then at that point the public has a week to bid on the property.The downside of this is that whoever buys at auction has no knowledge of any liens on the property and could pay dearly after buying at auction
If the property is not sold at auction...the property reverts back to the lender. And of course..the lender doesnt want this because it is now a liability,not an asset.Its at this hime that the property is considered an REO(Real Estate Owned) . The lender then contacts one of the realtors they work with to market the property at a significant discount to get it off their books
When you do a Short Sale..you are trying to prevent the home from going through all of this. It will still ding your credit a bit...but its a lot better than losing it to foreclosure
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