Like loan modification, short sale is a relatively new term in the real estate vernacular. While the concept has been around, it has gained popularity since the housing market came to a screeching crash in the second half of the last decade.
The popularity of short sales is owed to the fact that it lets owners get out from under the giant rock that is a house with a fast-declining value.
It hasn’t been unheard of to see homes once valued at $500,000 plummet to, say, $200,000. When the owner is left with a mortgage of $450,000 and a home value of $200,000, it’s obviously a big problem.
Refinancing is impossible. So is selling the home unless one manages to come up with the hefty sum of cash still owed on the loan.
Enter the Short Sale
Banks have no choice but to acknowledge that the home value’s decline is a problem that can’t be remedied and, as such, they are inclined to work with owners to remedy the situation. They will often approve the home to be sold at a price lower than what is actually owed on the loan. In other words, the owner can sell it “short” of what he or she actually owes.
A short sale can get you free of a loan that is otherwise impossible to pay back.
Of course, the process doesn’t come easily. You may have a buyer for what the home is currently worth, but the banks don’t just say, “ok, we’re all square.” They want to maximize their return and will often counter with a different price. The process can drag on for months.
Employing skilled agents and negotiators is critical to your success in a short sale. With good people and a little patience, the process will work itself out and you can be free of a burdensome loan.
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