Article summary:

This article offers a basic overview of the real estate short sale technique, as it applies to home foreclosures. This is an increasingly popular topic among home buyers and investors, so we will do our best to explain the basics of the short sale in this article.

It only makes sense to start off with a basic definition, just so we're all on the same page:

Short sale - (noun), A real estate sale where the sale price is less than what the seller still owes to the lender via the mortgage loan.

To state it differently, the homeowner will sell the home for less than what he or she owes to the lender. The mortgage lender will agree to accept this amount from the homeowner and "forgive" the remainder still owed. That is the basic premise of a short sale in real estate terms.

The Present and Future of Real Estate

The part of this article's title is "near future of real estate," which is partly true. In reality the short sale has been around for as long as home foreclosures have been around (i.e. for decades). But it's an easy prediction that short sales will increase considerably in the coming months. In fact, we are starting to see this already. Why is this the case? Simply because foreclosures and short sales go together like carrots and peas. So an increase in the former will also create an increase in the latter.

A Way to Avoid Foreclosure

The question most people have is this. Why would a lending institution accept less than what it is owed from a homeowner. Don't they lose money that way? Well, yes and no.

The short sale is typically used as a way to avoid foreclosure on a home. As the "short" name implies, it is a method to sell the home quickly when the homeowner is in financial trouble and facing foreclosure. So in this regard, the short sale is one of several ways a homeowner can avoid foreclosure on the home.

Most people don't realize that mortgage lenders typically want to avoid foreclosure as much as the homeowner does. It only makes sense when you think about it. Mortgage lenders are in the business of loaning money -- they are not in the business of managing properties, marketing them, selling them at auction, etc. These activities cost the mortgage lender money that they would rather not spend.

And that's why they often agree to accept a bit less than what is owed to them, as long as the homeowner can sell the home quickly by way of a short sale. By listing the home below its market value, it's a safe bet that the home will sell quickly.

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