Short Sale Definition: What is a Short Sale?

The short sale definition is simple: a house is sold for less than the amount due on the mortgage loan. The process, however, is much more complicated. Short sales are considered under certain conditions, and usually only come about as on option when it is clear to a lender that the full value of the mortgage will not be recovered. Getting the lender to realize that this is the best option for all involved is tricky and takes some knowledge of the requirements as well as finesse in the buyer.

Because the short sale definition means money lost to the lender of the mortgage as a result of financial difficulties on the part of the borrower, short sales often have many players involved. The home seller is looking for the best possible way to get out of the house that is no longer affordable. The lender wants to recoup the mortgage amount that was loaned for the initial purchase. Sometimes there is a lender that owns a second mortgage that was borrowed by the seller. Utility companies or even the IRS can become involved when bills go unpaid and liens are put on the property for unpaid taxes. Of course a buyer is part of the mix; someone who is looking for a great deal on a home that was previously out of reach or an investor looking to make a profit on the purchase and future sale of a property.

With the current markets as they are, the short sale definition is an invitation to investors that are wanting to benefit from these real estate trends. Investors find themselves to be in a position that is often more advantageous than people who are hoping to inhabit the home for sale. Because this type of home sale has so many individuals and companies involved, the terms have to be agreed upon by more parties. In turn, this makes closing dates more fluid and adjustable than traditional home sales or foreclosures. The elusive closing date is taxing on buyers that need to coordinate moving days with the sale of their current home or ending leases on rentals they’re staying in temporarily until a home is purchased.

The short sale process can be confusing and complicated for the uninitiated. Research is important, as well as finding a mentor that knows what to expect and how to handle the bumps in the road.

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