A real estate short sale is the sale of a property for less than what is owed on it by the owner obtaining permission from the mortgage company to sell the home at a discount and to avoid foreclosure.

Today, more than ever, homeowners are rapidly defaulting on their mortgages and to top it off, many homeowners are over-leveraged in their equity, even to a point of negative equity. They are literally upside down in their mortgage debt.

Homeowners are looking for ways to stop foreclosure and the short sale is a good answer because it will avoid foreclosure. It is a great relief when a homeowner knows that they can avoid a foreclosure and save their credit.

Short sales are great for buyers and investors because of the discounted property. The easiest way to spot a short sale is by the list price of the home. If a buyer or investor happens upon a home in a neighborhood that is priced far less that comparable homes, do not presume that there must be something wrong with the home. It is more than likely a short sale home.

The advantages for all parties involved is that the investor and the buyer can obtain a discounted property, the homeowner is relieved of a property that could have gone into foreclosure and ruined their credit, and the lender does not continue to lose money due to a foreclosed home that has to go through a long process in order to get sold, if at all.

The Short Sale process takes less time than a foreclosure and it actually benefits the homeowner in that the short sale is not over-burdensome and mentally draining to the homeowner. The owner is typically relieved that they can dispose of a property they can no longer afford. The buyer and investor are overjoyed because they can purchase a property at a discount and immediately have equity because it was purchased far below market.

When a home is purchased as a foreclosure, many times there is absolutely no equity in the home due to over extended credit from the banks and because any available funds must be used to pay off creditors. In a short sale, creditors must be paid as well, but the advantage to the buyer and investor is that there is equity because of the largely discounted price on the home compared to other homes in the same neighborhood.

The banks do not prefer foreclosures because there is usually not enough equity in the property to satisfy all creditors. And since there is no equity, there may not be any bids and the property goes back to the bank. The banks do not want an inventory of property, this is not why they are in business. Banks are in business to borrow money so that they can lend money. They can not successfully continue to do this when they have an inventory of property they can not get rid of.

Overall, the Short Sale provides a solution to foreclosure. This process can save many homeowners that are headed towards foreclosure.
Potential investors, buyers, and homeowners should not let the lack of understanding short sales prevent them from taking steps in this direction. The purchase of a short sale and the disposal of a property through a short sale can be a win-win situation for all parties involved.

There is still a ton of money to be made in real estate. You just need to know what to look for and have to guts to go after it.

Good luck to all,

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