What is a real estate short sale?
A real estate short sale is an agreement between bank or mortgage lender to discount a loan balance due to an economic hardship on the part of the mortgagor. In clear terms a short sale is a deal between a person with a real estate loan or mortgage to sell the house for less than the owed amount.
An example is if a person has a home mortgage for $200,000.00. And they can no longer make the payment, the loan holder (bank or mortgage lender) agrees to sell the house and take the sale price to satisfy the loan. So if the house sells for $150,000.00 the loan holder takes that amount. In this example the loan holder would lose $50,000.00 plus any fees and costs to do the short sale.
Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history
In short, a short sale is nothing more than negotiating with loan holders to pay off a loan for less than current balance.