What Is a Short Sale?
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What does "Short Sale" mean?
When a property owner owes more on their mortgage than what the property is able to sell for in the current market and, they don't have the funds to pay the difference between what the property is likely to sell for and the remainder of their loan, then they can pursue the option of a short sale.
Here's an example:
Jane Smith bought a 4 bedroom 3 bathroom home in Coeur d'Alene Place in 2006. She paid $240,000 for her home and ultimately borrowed $230,000. Over the years, the value of her home has dropped and now, she found out that she would only be able to sell it for $180,000 and that doesn't include commissions, closing costs, taxes, etc. She doesn't have $60,000 dollars in cash so she is looking at the short sale method as an option.
Here's another example:
Alan Hall bought his 3 bedroom ranch home in Woodland Meadows in 1998. He paid $100,000 for his home. When the real estate market really started to increase around 2005, he decided he would refinance his home, take the money and pay off debt, buy another vehicle, make renovations and take a vacation. In 2005, his home was worth $300,000 and he was able to take out a loan for almost the entire amount, $290,000. He and his wife decided that they need to go their separate ways and now, he has to sell the home and split the proceeds. The problem is, his home will only sell for $210,000 and he still owes $260,000. His option is a short sale.
In today's market, most lenders are willing to accept a short sale on a home as full payment for what is owed. There are exceptions and conditions, but in most cases, the seller doesn't have to pay a penny to get it sold, and in a good number of cases, the seller is paid money by the lender to make a short sale happen.