The term “short sale” has become common in the current housing market. However, few homeowners actually understand what it means. While some understand it to be some sort of way of quickly unloading a house for legal or financial reasons, others think of it as little more than an alternative term for foreclosure. But what is a short sale?
A Short Sale is Not Foreclosure
One of the biggest myths about a short sale is that it’s tantamount to foreclosure. While some homes are sold on short sale to avoid foreclosure, a short sale is not the same as a foreclosure. A foreclosure is when a lender proceeds legally in taking back a property because the homeowner has failed to pay the monthly mortgage for several consecutive months. In a foreclosure, a lender forcefully takes back a property from a homeowner. In a short sale, the lender agrees to sell a property for less than the amount currently owed on the loan. In a sense, it’s a form of debt negotiation. Through a short sale, a lender is still able to quickly collect some of the amount still owed on the property and circumvents the expensive legal costs of a formal foreclosure proceeding.
Who Buys a Short Sale?
Anyone can negotiate a short sale. However, short sales are particularly popular with “flippers” who like to buy real estate at a cheaper=-than-market value and then resell the house for a profit. Those homeowners looking for a nicer home than they might otherwise be able to afford also buy short sale properties.
Can I Short Sale?
That depends on whether or not your lender is willing to agree to the terms of the short sale. One must work with their lender in order to make a short sale of their property or risk being responsible for the difference between the value of the home and the amount for which it was sold.