At Park Place Homes, a common question we get is “What is a Short Sale?” A Short Sale occurs when a homeowner’s lender agrees to allow the sale of the house for an amount “short” of what is owed on the loan.
There are many scenarios that happen warranting a short sale. Most commonly, the homeowner is in financial distress: they are stretching to make ends meet, and to make the house payment, so they try to sell only to discover they owe more on their loan than the house is worth in the current market. This is when the short sale process begins.
Typically, the negotiation with the bank to determine if they will allow the short sale is managed by a qualified real estate professional, and a qualified short sale negotiator. Be aware, the word "short" in short sale is a misnomer! Short sales on average take 4 months before the buyer and seller will know IF the lender will accept the terms of the short sale. Purchasing a home listed as a short sale should not be considered if the buyer is working within a time frame.
The benefit to the home owner to do a short sale is it prevents a likely foreclosure. The homeowner's credit rating is not damaged as much, and they will likely be able to purchase a home again in 2 years, if they choose.
The benefit to a buyer of a short sale is the possibility of buying a home below current market value. Homes sold on a short sale will often sell for 10-15% below current market value. Another benefit is, unlike foreclosed homes, the short sale home has been lived in and has been maintained. Many foreclosed homes have been left vacant and not taken care of for months.