A short sale(in terms of real estate), is when the sale of the property falls short of the overall debt. Say, for example, you sell a property for about $50,0000. However, the debt for the overall property(such as liens, etc)is about $100,000.

Now the lender can either agree to the $50,000 or not. Say, for example, that the lender does agree to the terms. A short sale has then occurred. The seller will not make any money from the sale. The reason is that the $50,000 goes to paying off the debt.

Is This A Good Thing For The Seller Or Not?

According to many real estate experts, it can be either(or) for the seller, lender, and buyer. It all depends on the situation. On the one hand, the seller can be damaged by this through their credit score. However, this is the lesser of two evils(for the seller) when you compare it to foreclosure.

The reason is that the proceeds are going to be less than what the seller needs to pay off their debt. However, the lender did agree to the $50,000.

What about the buyer?

This is probably going to be a good thing for the buyer. He or she is paying out less than what was initially required. The one downside is that you may have to wait a little while before you can move in.

Can you negotiate the price even lower in a short sale?

You can, but it will take more time. Plus, the lender has to agree to the terms before the sale takes place. Remember that the lender is collecting on a past debt owed by the seller.

Let’s use the example from above. Once again, we are using $50,000(not $100,000) as the benchmark. The lender might have a hard time saying yes to $50,000 to start. It is highly unlikely that the lender will want to go down any lower. They are already agreeing to less than the actual debt. You are better off sticking with the $50,000 and leave it be.

Are There Any Risks To Buying A Short Sale Home?

Yes, there are. We are going to break down the disadvantages into a few key points.

1) You buy the house “as is”. That means you are not able to negotiate with the seller about modifications. You must take care of the modifications if you need them.

There could be some much-need remodeling for the house. Once again, you take care of that yourself.

2) You(as the buyer) are subjected to the mortgage and lender approval. That means the lender has a say in who buys the home since they are trying to collect a debt on it.

3) You either pay the full sum with cash or make a very large down payment before the sale takes place. Lenders do not accept any in-between.