How a Real Estate Short Sale Works

Note! The following information should not be relied upon as legal authority. This information should supplement, not substitute, for the advice of competent legal counsel.

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A real estate short sale situation may be right when a homeowner is in foreclosure and the loan amount is close to the value of the home. The seller cannot sell the house with an agent because the fees involved exceed any moneys received from the sale. What can you do?

If you own a house and are late on your payments, you might want to learn more about short sales and if a short sale is right for your situation. Banks will consider a short sale in lieu of getting the home back. The bank takes less than what is owed on the loan.

An example would be, if you owe say $300,000 dollars on your home and you are facing foreclosure the bank might take $225,000 dollars and you’re off the hook for the balance. Bank will consider a short sale because if the bank continues to foreclose they most likely will get the house back – and that’s bad news for a bank. They will then have to hire a real estate agent, make any necessary repairs, wait several months in hopes of getting an offer, that, they still might lose money on the process. Its far simpler for a bank to sell the property to a cash home buyer and cut their loses. The most beneficial point to a short sale is that the seller does not have a short sale on their credit report, just a loan adjustment.

A key component to all short sales is that the owner(s) need to be completely up side down and was victim of some kind of a hardship – out of the ordinary event that caused the default; such as illness, accident, loss of job, etc.

Sometimes the only way you can sell a house and protect your credit is through a short sale. It allows you to sell your house really fast, gets you out of the loan responsibility and you can go on with your life. You almost always need a cash buyer/investor to handle the process correctly, ensuring a successful transaction. Banks want you to use an investor because they want to close out the loan as soon as possible.

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