In today's changing real estate market we hear the word short sale used many times. In fact the word is used by both real estate professionals and home owners. Often times the definition of what a short sale is is not clear. It is critical that all parties understand what a short sale in real estate is.
We thought we would define a short sale and give an example so that everyone knows what it is.
A short sale is where a property is being sold for less than the total amount that is owed to all lien holders on the property.
So in other words if the property cannot be sold without the seller, the bank, or someone on the selling side having to take a loss or bring money into escrow to close the transaction it will be a short sale. Short sales are most often done with a bank and that is what we will cover here.
An example of a short sale:
- Loan 1: $300,000
- Loan 2: $50,000
- Total Value of Property: $315,000
So in the above example the property is at least $35,000 short of what is needed and that does not take into account real estate commissions and other fees necessary to sell a property. This is what is considered a short sale where the home owner will go to the bank to ask for assistance.
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