"Short Sale" is a Real estate term that's getting used a lot nowadays. You may be wondering how a short sale is different from a foreclosure or a normal home sale. What does a short sale mean for you as a buyer or a seller?
A short sale is one possible option for a homeowner who owes more for a home than it is currently worth. You'll see these mortgages called "underwater" or "upside down." A Short Sale is what happens when a bank agrees to allow the homeowner to sell the home for less than the original loan's value. The "Short" in a Short Sale is the difference between the amount owed and the amount repaid to the mortgage company after the home's sale.
For a seller, getting a bank to agree to a Short Sale can be a financial lifeline. Homeowners who've lost their jobs and are unable to sell their homes are in a terrible financial situation. The monthly payments don't lower to reflect their home's current market value and selling the home in order to downsize expenses is nearly impossible if the price has to be based on peak prices. Banks won't always agree to a Short Sale, and the homeowner is often expected to make up some or all of the price difference to the bank after selling, but sometimes this option is the best way to prevent bankruptcy and foreclosure.
Short Sales also have pluses and minuses for buyers. Short Sales create more homes for a buyer to choose from that are priced for today's market. If you do fall in love with a Short Sale home, you'll need to be patient. Every Short Sale has the extra step of Bank Approval, which can add months to the whole process, depending on the number of loans and liens against the property. It's also very important that you work with a realtor and Real Estate attorney who are knowledgeable about the Short Sale process. They will be able to advise you of any potential problems and additional delays.
Short Sales can be a very attractive option for Buyers, Sellers and the Banks involved. If you want to know more call me at (973) 335-4600