What Is A Short Sale?

     A short sale happens when a home owner sells their house and they owe more on the mortgage than the current market value of the property. The contract of sale is still between the buyer and the seller. The bank approval is a 3rd party contingency to the contract. The amount that is still owed on the promissory note after the short sale is closed, in some cases, may still be the seller's responsibility.

     The only thing the buyer pays is the purchase price of the home and your closing costs. In order for the lien to be removed from the property the bank has to approve the sale. The banks would rather approve a short sale than go through foreclosure proceedings as they save money that way.

   One issue with a short sale is that it can take 2-6 months (and in some instances more) to get this approval from the bank. Another very important thing to remember when dealing with a short sale is that the bank will not approve it unless the sales price is close to fair market value.

   A low offer will not work on a short sale because the bank will just reject the sale. And again, it could take 6 months to find out the bank said no. If handled properly, a short sale can be a very good way to get a well priced home.