What is a Short Sale as it Relates to My Home?
A short sale is when your real estate is not worth as much as you owe on the home.
Can you ever do a short sale if your home is paid off and nothing is owed? The answer is no. A short sale only occurs when you are shorting the bank of money that's legally owed to them in your financing contract.
Why would you ever do a short sale? If you need to move but are upside down on your mortgage you would need to conduct a short sale to sell your home.
Can you give me an example of a short sale? Sure you if you owe $300,000 to ABC bank and your home is now worth $250,000 you are $50,000 short of what you can get a buyer to pay you for your home. Your options at this point if you must sell your home is to 1. pay the difference between what someone is willing to pay and what is owed to the bank (in this case $50,000), 2. walk away from the home and give it back to the bank and suffer a foreclosure on your credit along with the debt obligation owed back to the bank., 3. ask the bank to help you sell your home by conducting a short sale. If you don't have $50,000 this is your only option of getting rid of the home without going through foreclosure.
Why would a bank want to give up money you owe them and agree to a short sale? The bank is not in the real estate business and it's cheaper for a bank to accept a short sale and take the loss than to go through all the legal proceedings of a foreclosure. It's better for most banks and it's better for you.
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