In the real estate world, some deals are unlike others. One such deal is a “short sale”. It usually happens when a homeowner sells their property for an amount less than the mortgage. The ‘short’ in this situation means being short on money, not on time. Let’s get into it.
Imagine that you want to sell the house. The current market price of the house is $450,000. However, you owe $500,000 to the bank, and even if you sell the house for $450,000, there’s still a $50,000 shortfall. In this scenario, the bank can agree to write off the remaining $50,000. If so, this deal will be called a short sale.
This process is a middle ground between a regular sale and foreclosure. However, there are differences between a short sale and foreclosure. Foreclosure means eviction, seizure of the home, and a big negative impact on the credit score. A short sale doesn’t have any of that, except for the credit score impact – though it is significantly less severe (a 7-year record for foreclosure vs. 2 years for a short sale).
From the buyer’s point of view, it’s also better to purchase a short sale property instead of a foreclosed one. These properties are usually in better condition compared to foreclosed ones, and the price tag is about 10% lower than market value.
There is more to “short sales,” and one of the important nuances is that it isn’t “short” on time. These sales can take a long time, usually 4-8 months or more.
It is also important to contact a professional real estate agent to help you navigate a short sale, as these deals often involve complex and unique situations.