What is a short sale? Are they good for the seller and buyer? These Questions and more answered in this article.
Many times, when a homeowner is facing foreclosure on their home, they will list the home a short sale offering. (referred to as SS through this article)
A SS is simply selling a home "short" or below the mortgage payoff. If a home owner owes $150,000 on his mortgage but cannot sell if for $150,000 or above, he would then negotiate with the lender to accept an amount below what he owes on the property.
A SS is subject to lender approval UNLESS you plan on obtaining a loan to cover the deficit. In this situation, you do not involve the mortgage company. For example, if you owe $150,000 on the home and sell it to a buyer for $130,000 but then you obtain a loan for $20,000 to pay off the loan in full at closing.
What most people do not realize, is that most lenders will come to you for the deficit anyway after closing. Although there are times when the lender will "absorb" the loss. You can always call and ask.
In my opinion, a short sale is not worth the hassle. It is very time consuming and it is much simpler to obtain a personal loan to meet the loan requirements. That is, if you can obtain a personal loan.
A short sale does reflect on your credit report. EVEN if you pay the lender back. This is also a disadvantage.
But in comparison to a foreclosure, this is a better choice.
Back from What is a Short Sale to buying a bank owned home page