What is a ‘Short Sale’ in Real Estate?

A short sale in real estate is a transaction in which a lender agrees to accept less than the full amount owed on a mortgage. This can happen when the borrower is unable to make their mortgage payments and the value of their home has decreased.

When a borrower is in default on their mortgage, the lender has the option to foreclose on the property. Foreclosure is a legal process that allows the lender to take possession of the property and sell it to recoup their losses. However, foreclosure can be a lengthy and expensive process for both the borrower and the lender.

A short sale can be a more attractive option for both the borrower and the lender. For the borrower, a short sale can help them avoid the negative consequences of foreclosure, such as a bankruptcy filing and a damaged credit score. For the lender, a short sale can be a faster and more cost-effective way to recover their losses than foreclosure.

However, there are some risks associated with short sales. For the borrower, there is no guarantee that the lender will agree to a short sale. And even if the lender does agree, the borrower may still be responsible for paying the difference between the sale price and the amount owed on the mortgage. For the lender, there is a risk that the property may sell for less than the amount owed, which could result in a loss.

If you are considering a short sale, it is important to speak with a real estate attorney and a mortgage lender to understand the risks and benefits involved.

Here are some of the benefits of a short sale:

• Avoids foreclosure
• Can help protect your credit score
• Can be a faster and more cost-effective way to sell your home

Here are some of the risks of a short sale:

• The lender may not agree to the short sale
• You may still be responsible for the difference between the sale price and the amount owed on the mortgage
• The property may sell for less than the amount owed, which could result in a loss for the lender

If you are considering a short sale, it is important to speak with a real estate attorney and a mortgage lender to understand the risks and benefits involved.