What is a Short Sale? Simply put, a short sale is the sale of real estate where the property owner owes more to the bank than it is worth. Due to financial hardship, the seller is unable to make payments to that lender. The lender is entitled to approve this type of sale since they may potentially suffer a financial loss.
A Short Sale transaction is unique and involved in that the seller and buyer, with assistance from their brokers, actually collaborate on a Proposal that the buyer will present to the seller’s financial institution. Generally, the lender is not contacted until the proposal is complete.
The property can be a “bargain”, and the proposal might request that the lender consider a price that’s lower than what the seller originally paid. However, in order to satisfy the seller’s lender, the current asking price should fall within the range of the property’s “fair market value”.
A Short Sale is an “as-is” purchase. This relieves the seller of any additional expense that could become apparent through inspections. If renovations or repairs are necessary they should be fully documented.
The experience of a broker comes into play in determining whether a particular Short Sale should be pursued. A seller who owns multiple properties may not be eligible for this type of sale. Buyers interested in a quick sale, may want to concentrate effort on “approved” Short Sales.
Every financial institution has an independent philosophy of what constitutes a reasonable Short Sale offer. Knowledgeable brokers will assist the seller and buyer in determining down payment, price, and whether a cash offer is beneficial to their proposal.
Read the entire article at our Guide to Short Sales.