I have been getting the question, “What is a Short Sale?”
Thank you Casey Serin for this photo.
As our market changes we now have new additions to our real estate vocabulary. Just a year ago the term, “short sale” was not even a word on our terminology radar. So, it is not surprising that many of my clients are now asking, “What are short sales?” Maybe, more importantly can short sales be a buying opportunity?
A short sale is when a property is sold for less then the debt owed on it. It is usually done as an owner’s last resort for liquidating a property before a debt holder begins the foreclosure process. Short sales require the seller to come up with money at close of escrow to cover the difference between the debt owed on the property and the sales price.
So can a short sale be a deal for a buyer? The answer is most short sales are more complex and harder to negotiate than a typical real estate transaction between a buyer and a seller. Often when a sale is short, the seller does not have sufficient funds to come up with the difference. This brings the bank in to the picture. Banks do not like to lose money, and in our current robust market most banks are stiff negotiators. Banks are usually tougher to deal with in a negotiation than an individual seller. This is because they have capital and corporate structure to rely on when negotiating. They have more power than an individual to wait for good offers and withstand low-ball offers. Often if a bank has completed the foreclosure process they will want more money for the home than the owner. This is due to the high cost of the foreclosure process.
