What is A Short Sale?

A short sale is the process by which a homeowner can sell a house for less money than he actually owes on the mortgage(s).  This is done by the buyer or investor providing proper documentation to the mortgage lenders to convince them to reduce the mortgage balance to allow the sale.  The mortgage lender actually takes a loss on the mortgage because the value of the home has fallen below the mortgage balance AND the homeowner is in a poor financial condition that will not allow him to continue to pay on time.

If the bank approves the discount on the mortgage, the home can be sold for a lower price without the seller having to come up with cash to cover the shortfall, and the mortgage is satisfied and the foreclosure process stops.

What type of situation is the short sale best for?

Most short sales are done on properties in pre-foreclosure.  This means the homeowner is at least 3 payments behind and the foreclosure suit has been filed by one of the mortgage lenders.  Recently, more mortgages that are simply behind or "in default" are considered short sale candidates without actually being in foreclosure