Short Sales: What Are They?

 

We've had people asking us lately, "What is all this talk about Short Sales?… what are they exactly?"

 

Very briefly, a short sale home is a home where the seller is POSSIBLY having to sell because of a looming foreclosure. A short sale does not always necessarily mean that foreclosure is looming. In most cases, when the property listing says there is a short sale situation or needs a third party approval, it indicates that the Seller owes more than the house is worth in order to provide a buyer clear title. In some short sale situations, the Seller's payments can be current with their Lender, which is not the case if foreclosure is looming.

 

One of the common reasons a Seller gets themselves into a short sale situation is by taking out a 2nd and/or home equity loan on their property and in the meantime, the value of the house has decreased in value, rather than increased. Many times the Seller has used the money from the additional property encumbrance to make improvements to their home. They risk over-improving the house for the neighborhood, making it impossible to get a return on their investment. A Seller is especially vunerable for this to happen if they haven't lived in the house a long enough time for the neighborhood to catch up with their property improvements.

 

In our current market climate, short sales can occur merely from declining home values, or market price adjustments due to the lack of liquidity in the credit markets, resulting in fewer qualified Buyers. Keep in mind that all real estate is local and pricing is about supply and demand. The market (a willing and able Buyer and a motivated Seller) ultimately decides what a property is worth.

 

If you still have questions about what a short sale is.. please feel free to post your comment or question here for our other interested readers, and we'll be sure to answer here as well. Just use the "comment" link below to post your question or comment.