What is Short Sales?

Foreclosure short sales, short selling, or short pay takes place when the payoffs from the sale of a property, especially residential, fall well short of the balance owed on a real estate loan. In such situations, the property owner requests to close the mortgage amount at a discount on his/her outstanding loan from his/her respective lenders, which mostly are banks or financial institutions. The discounts are requested due to the homeowner's economic or financial adversity and inadequate liquidity levels. If the lender agrees to close the mortgage loan at the suggested discounted rate, the property is said to be short sold. This is a pre-foreclosure stage. The lender now owns the defaulted property.

The lender, as a next step, sells the short sold property for less than its full amount or its prevailing market rate, as foreclosure shorts sales. Most lenders, banks or financial institutions, go for foreclosure short sales to minimize losses, as including a property into their own inventory, will have their inherent expenses, such as maintenance, brokerage fees, financial liability (bad debt), and a lost selling opportunity, which could cost lenders a lot of money.

• Credit score preservation - Compared to foreclosures, short sales have less impact on the credit score of the homeowner.
• Financial liabilities free - All mortgage debts of the homeowner are completely discharged.
• Avoiding foreclosure - Short sales are a very good solution to foreclosure for the homeowner, as one and can use it to escape foreclosure on his/her financial records.
• Buyer benefit - Buyers going for foreclosure short sales often get a good purchase at a discounted price.
• Trusted purchase - As the seller is the lender itself, mostly an authorized bank, the purchase is most likely to be legal, transparent, and smooth.
• Lender benefit - Short sales make financial sense for the lenders, as they save them the costs linked with immediate foreclosures and generate instant equity.

• Affect of late payments & delinquency - If you lag on payments, your credit scores may be severely hit.
• Short sale can last for long time - The unpaid balance often converts into a long-term debt that eventually the lender owes.