What is a Short Sale?

'Short Sale' is a common term that you hear in the real estate world, but many people do not know what it means. The technical definition of a short sale is: 'a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.' This generally occurs when the borrower can no longer pay the mortgage on their property and the lender agrees to sell the home for less than what is owed on the home. 

So what should you know when purchasing a short sale? First, that any offer you make on a short sale property will need to be approved by the bank, not the seller. This can make buying a short sale property more lengthy and complicated than a regular sale would be, since each offer must pass through and be approved by more than one individual within the company. Keep in mind that the bank will attempt to recoup its losses and get the highest price they can for the property to satisfy the debt. So don't be surprised if when you make an offer on a short sale home or property, that the bank replies with a (sometimes unreasonably) high counter offer. Short sales are all about negotiation and the bank has to prove to its investors and shareholders that they are doing their best to make back their money. 

Don't be too discouraged by this, short sales can be a great option for any home buyer or investor, just be prepared to do a lot of negotiating and waiting.