What is a Short Sale? A short sale is a favorable alternative to foreclosure where the lender on a property agrees to accept (as a full payoff) less than what they were originally owed, so that they can avoid the foreclosure process and allow the house to be sold. The bank also absorbs all the costs of sale. (Including realtor commissions, closing costs, escrow fees, etc).
So for example, let's say that a homeowner is unable to make their mortgage payments. Their mortgage balance is $500,000, but the property value has since dropped down to $450,000. With a short sale, the lender will reduce the amount of money they are owed so that it's low enough to allow the property to be sold for $450,000, and to cover the associated costs of sale.
Thinking of doing a Short Sale? Here are its benefits: