What Does Short Sale Mean?
What does short sale mean when it comes to real estate terminology? A lot of people in the real estate market are not familiar with it. There is some confusion about what it is, when it is due, and how to handle it. It all started back in the 90’s, when homeowners were being foreclosed upon. The government stepped in and made changes that relaxed mortgage requirements, but left the power in the hands of the homeowner. Homeowners had to come to an agreement with their lenders before they could be eligible for a short sale.
Basically, a short sale allows the lender to accept less than is owed on the home. This is usually done in exchange for the borrower dropping the foreclosure lawsuit. This is a huge benefit to the lender because it means they will avoid further expense and hassle of a foreclosure.
Lenders have to consider any other offers that a homeowner may place. This means the offers could be a better deal. They may also feel that it would be in the best interest of the homeowner to accept this offer than to keep the home. In addition, lenders have to balance the loss of the foreclosure with the possibility of gaining a profit on the sale of the home. They need to weigh the costs of taking the home back versus the potential gain.
Short sales are different from foreclosure. Foreclosure involves a court order for a homeowner to leave the house. Short sales do not require a court order. They are voluntary and occur when a homeowner makes what is considered a reasonable offer to the lender. It is typically a selling price less than the mortgage balance. The lender, not the homeowner, must approve the offer.
What does short sale mean? It is simply the process of selling the property before the foreclosure auction occurs. This is done to attempt to lower the amount of money the bank or lending institution will get out of the foreclosure. Usually, the banks and lending institutions get around the issue by offering a deficiency fee to the delinquent homeowner. This fee is not included in the original loan contract, so it is not part of the standard process of foreclosure.