Short Sale is a property that sells for less than the balance owing on its mortgage. A short sale can be a home, condo, and/or townhome. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.
A Short Sale is a Privilege, Not a Right
Not every property qualifies as a potential short sale in a bank's eyes. A bank must agree to grant a short sale. Banks are under no obligation to approve a short sale. Banks will grant a short sale if the bank feels it is in the bank's best interest to approve the short sale.
It is in the bank's best interest to approve the short sale if the bank will make more money through the short sale than to foreclose. It is estimated that banks might save 25% to 30% on foreclosure costs to grant a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.
What is Necessary for a Short Sale?
Most short sale transactions are handled by real estate agents who specialize in short sales. There are 4 essential ingredients to a short sale; however, strategic short sales, those without a hardship, are also possible. What makes a short sale work are the following:
An underwater home
A willing short sale bank
A seller with a hardship
A buyer willing to purchase the home
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