Short Sales (Based on my experience and opinion)

A short sale occurs during the early stages of the foreclosure process.  This is before the foreclosure has been finalized and while the property owner is still in control of the property.  It is essentually a normal sale of the property with one big difference.  In the case of a short sale, the amount of money that the property is likely to sell for, is less than the mortgage owed to the bank.  That is, it is "short" of the amount needed to pay the debt.

The process is pretty much the same as a nomal sale.  The property owner lists his property with his favorite REALTOR@ agent (perhaps me) and it goes on the MLS.  We will price it at a level that is likely to get an offer, but provide a reasonable amount to the bank.  This price will be "market driven" and is not influenced by the mortgage amount owed.  It doesn't matter.  The market will only support what a ready, willing, and able buyer is willing to offer.  A seller, has no equity, so he will not be receiving any money (that is $0) for this property.  It may be hard emotionally, but he should have no reason to price it higher than the market will pay.

So buyers have an opportunity to purchase a nice property at, or perhaps below market value.  However, one important issue to note is...  Short Sales are NOT usually short in time.  That is because the loan holder (bank) will need to approve this transaction.  They must agree to take the lesser amount towards their mortgage note.  As their alternative is to complete the foreclosure and take possession of the property, they will often agree.  However, the time frame to get this bank approval can take weeks or even months.

If you make an offer on a short sale property, please be prepared to wait as long as needed to get this answer from the bank.  If you find a property that you like, you will likely get it at a good price, but only if you have the patience to wait.

Short Sales - The process in which a servicer works with a delinquent borrower to sell the house by a real estate agent prior to the foreclosure sale.

Foreclosure - The legal process by which a property may be sold and the proceeds of the sale applied to the mortgage debt. A foreclosure occurs when the loan becomes delinquent because payments have not been made or when the borrower is in default for a reason other than the failure to make timely mortgage payments.

Servicer - A firm that performs functions in support of a mortgage that include collecting mortgage payments, paying the borrower's taxes and insurance, and generally managing borrower escrow accounts.

These definitions are taken from the FannieMae website and are part of a Glossary of Terms supplied to make Homeowners familiar with Real Estate  processes. They are included in this website as courtesy.