What is a Short Sale?

A short sale occurs when a homeowner cannot sell their home unless the lien holder (your lender)  agrees to accept a payment that is less than the amount actually owed.  In other words, the bank has to agree to accept less than the mortgage due on the home.  Since 2008, there has been a trend of increasing short sales and foreclosures.  There are two main factors for this trend.  The first is home values have fallen, leaving homeowners owing more than their homes are actually worth.  The second is financial hardship, leaving homeowners in a precarious position of not being able to meet mortgage demands.  A short sale involves listing a home for sale at an amount that is approximately 85% of the home’s current value, not based on what you owe!  The listing is like any other in terms of putting it in the market place and negotiating terms with potential buyers.  The key difference from a regular home sale is the short sale process requires acceptance of a buyer’s offer by both the seller and the bank.  An initial contract is submitted to the seller.  If the seller agrees to the terms, it is then submitted to the bank.  The bank must approve the terms, and most importantly, the price.  Short sales will generally take longer to complete than a regular sale as the bank must analyze and approve the contract based on its own market analysis of the home’s worth.  Another difference is banks usually will not agree to fix items that are discovered during the buyer’s inspection.  These properties are sold “as is.” A Realtor works on the homeowner’s behalf throughout the process.

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