Can someone explain what a Short Sale is?

Question

I've forgotten. Just about everybody in my family is a real estate person and we're buying a house that is a short sale and I have completely blanked on the term. I have no head for real estate c**p (which is why I work in Construction Management, lol).

So, in the simplest terms possible (I could always look it up if I want more jargon), would someone mind explaining it to me?

It's a four bed, 2 and a half bath on a .4 acre lot in Southern California.

Answer 1

I means they're losing money.

Answer 2

The mortgage company has agreed to sell a home for less than is owed to them.

Answer 3

A Short Sale is when a property is being sold for less than what is owed to the bank.  For example, your mortgage balance is $500,000 and the value of your home is only $400,000 (which is what's happening now in real estate market), if you sell your home for $400,000 that's short of $100,000 from what you owe from the bank.  The bank has to take a loss of $100,000 - that's short sale.

Buying a house that's on short sale is a long process - you have to be patient, the lending institution has to approve the sale price and commission rate.  And because they handle too many of those, it takes them a long time to reply to offer(s).

Answer 4

The owner has some hardship where they can't make payments. So, rather than foreclose on the owner, the bank has agreed to take less than what the owner owes on the property to pay off the mortgage. They instruct the owner to place the home for sale and see what they can get for it. And, when the house is sold, the bank collects the proceeds from the sale, they write off the loss, and they forgive the rest of the debt.

Answer 5

For the buyer short sale transaction is the same like regular purchase transaction. For the seller it is mean that he try to sell this property for less amount that he own to the bank- with bank permission.If the short sale price is already agreed with bank it should be smooth, but if you are in the negotiating process it could be dragging and long.

Answer 6

A short sale is where the bank has agree'd to sale the house for less then what is owed on the mortage. Basically the bank loses money on this. It's also the step before foreclosure. To me it seems like sometimes a home sells for less during a short sell then when it beomes a foreclosure. My real estate agent showed me a home that was being sold for 129,000. That was what was owed on mortage. He got a quick sale for it though and listed it @ 90,000.  

Answer 7

it's the stages before foreclosure

Answer 8

The mortgage is larger than the value or the property.  The bank realizes this so they are agreeing to take a loss when the property is sold in order to get rid of the place.  To do this the bank must agree to the sale.

For example, you buy a place for 250K with a 220K mortgage.  Due to sub-prime the value falls to 150K and you lose your job and can no longer pay the mortgage.  You fall behind paying your mortgage payment but inform the bank of the problem.  They don't really want to foreclose on you and evict you (takes to long) so they agree to forgive the extra debt if you can sell the place for 150K.  Sales price is less than the mortgage (but its still cheaper for the bank to allow this sale, so they do) so this is a short sale.

Answer 9

A short sale is when the bank agrees to take less than what is owed on the house in settlement of the mortgage.