Add a comment | Friday, May 29, 2009
A short sale is a sale of real estate in which the proceeds from the sale are less than balance owed on a loan secured by the property sold.
In a short sale, the bank or mortgage lender agrees to reduce a loan balance due to an economic or financial hardship on the part of the borrower/mortgagor.
A short sale typically is done to prevent a home foreclosure. Often a bank will allow a short sale if they believe that it will result in a smaller 
financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. For the home owner, one advantage includes avoidance of a foreclosure on their credit history. A short sale is typically faster and less expensive than a foreclosure for the banks.
This negotiation is all done through communication with a bank’s loss mitigation department, and usually your real estate professional. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
In short, a short sale is nothing more than negotiating with the bank a payoff for less than what they are owed.
