What is a short sale?

A short sale occurs when a seller sells their property for less than the amount they still owe on the mortgage. This is also known as a "short payoff." A short sale is often an option of last resort for homeowners who are struggling to make their mortgage payments and owe more on their mortgage than their home is worth.

When does a short sale make sense?

There are several factors that homeowners and real estate professionals should consider when deciding whether or not a short sale is the best option:

-The property must be offered for sale at a price that is lower than the amount of money owed on the mortgage.

-The lender must agree to release the lien on the property and allow the short sale to go through.

-The short sale is often more complicated than a traditional home sale, so the short sale process will be longer and more expensive.

Who should use short sales?

Short sales should be used as a tool of last resort because they are complicated and time consuming for real estate investors and can cost homeowners significant money in fees:

-Homeowners: selling short requires the homeowner to pack up and move out of their home while it's on the market, which means packing up all of their belongings, paying additional moving costs, etc. And if the short sale doesn't work out, then they may find themselves still stuck with two mortgages anyway.

-Real estate agents: short sales take a lot of time and effort to complete, so agents who specialize in short sales may not be able to take on as many short sale transactions as they would like.

-Lenders: lenders often have to spend a lot of time and money processing a short sale, so they are less likely to agree to a short sale if the property is worth significantly more than the amount owed on the mortgage.

What happens during a short sale?

There are three parties involved in a short sale: the homeowner, the buyer, and the lender. The process generally goes something like this:

1) The homeowner finds a buyer for their property and negotiate a price that is lower than what is owed on the mortgage.

2) The homeowner contacts their lender and asks for permission to short sell the property.

3) The lender evaluates the property and decides whether or not to agree to the short sale.

4) If the lender agrees, the buyer and seller finalize the purchase agreement and closing date.

5) The homeowner moves out of the property and hands over the keys to the new buyer.

6) The money from the sale is used to pay off the mortgage, and any remaining proceeds are given to the homeowner.