A short sale in real estate means that a homeowner wants to sell a home for less than they owe on the current mortgage so they can avoid foreclosure. Mortgage companies may lose out on money if this occurs, so they must approve any short sale that occurs.
Because the transaction involves getting approval from the mortgage company, these home sales often take longer than a typical sale. Both the buyer and the seller should be prepared to “hurry up and wait” as they try to work out the terms for the sale.
What should you know about short sales?
Most short-sale properties are offered as-is. The mortgage company likely isn’t going to fix things that are wrong with the property so potential buyers need to understand that they are going to be responsible for fixing everything that’s wrong.
The current homeowner will typically have to work with the mortgage company’s loss mitigation department to find out if they’re able to sell the home via a short sale. Some mortgage companies don’t particularly care for these transactions because they tend to take longer than a foreclosure, and they allow the homeowner to remain in the home longer.
Any buyer or seller who’s interested in a short sale should learn about how the process will impact them. These can be very complex transactions, so everyone involved should be clear about what’s possible. Having someone who can review the documents that are part of the process is critical just so you can be sure that you’re protecting yourself and not missing anything critical in these.