A Short Sale is the sale of Real Property for less than the amount needed to pay off or to satisfy the secured debts (mortgages, liens, etc.) owed on the Property. It has been said by many that because of all conditions concurrently going on in both the economy and in government, that 2012 will be the Year of the Short Sale.
Let's suppose your house is worth $200,000.00 in todays real estate market and you owe $300,000.00 on it to the bank. In this situation, if you put get an offer for $200,000.00 you would either need to come to the table with over $100,000.00 to be able sell your home (to satisfy the mortgage) or you would need to get the bank to agree to accept less than what is needed to pay the mortgage off. In this example, it may be possible to get the bank to agree to accept the $200,000.00 as payment in full of the mortgage. This would be what's known as a Short Sale. It is important to note that just like in a conventional sale, the seller has total control over the sale of his or her house. For instance, the seller of a Short Sale property still determines what price to start listing his or her home for, what offers to accept or reject, and when he or she wants to have settlement of the property. The only difference in a Short Sale is that the bank who holds the mortgage needs to approve or the "short" payoff.
However, not every home qualifies as a potential Short Sale to a bank. A bank must agree to the Short Sale and are under no obligation to approve of a Short Sale. The bank will only grant a short sale if it feels it is in the bank's best interest to approve the Short Sale.
When you are selling your home and in a Short Sale situation, it is very important to obtain legal and tax advice to fully realize the implications of a Short Sale before listing your home for sale. Like a Short Sale, there are many other tools you should be fully familiar with when you are underwater on your home or facing a foreclosure situation.
