What is a Short Sale?

Basically a "Short Sale" is when a lender who is owed money on a property will agree to settle for less than what is owed. This can be advantageous to the lender because if the lender were to foreclose on the property then extra costs, lost interest and ownership responsibilities are burdened on the lender until the property sells.

To a seller of a property it allows the seller to sell a property in a slow and/or declining real estate market. A Short Sale may adveresly affect the sellers credit but might not affect the credit as adversely as a foreclosure may.

To a buyer of the property it may allow the buyer to purchase a property for less than market value and less than what is owed prior to a foreclosure sale/auction. If the property were to go to the foreclosure auction then typically the lender (or trustee) will bid what they are owed and any other bids would need to be in excess of that bid.

A few pro's and con's of the Short Sale;

• Short Selling is based upon mutual agreement between a seller and a lender. Many times if a seller isn't relieved of all liability from the loan then the seller may not agree to the Short Sale. The lender is under no obligation to agree to a Short Sale.
• The time frame for a Short Sale Agreement may be longer than a typical sale process, 4 to 8 weeks or longer.
• At any time prior to the seller and the sellers' lender agreement to a Short Sale, a buyer may recind their offer.

As with any offer to purchase a sale is based upon what the seller is williing to accept and what the buyer is willing to pay. A listed price isn't necessarily the final agreed to price between a buyer and seller. The same holds true for a seller and a lender. A purchase may offer less than the asking price even if the sale is subject to a Short Sale agreement.

The above explanation is only a thumb nail sketch designed to enlighten a buyer and/or seller of real property and is not to be relied upon for the purposes of negotiating the sale or purchase of real property. Please contact an expert for assistance.

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