What is a Short Sale?

I keep hearing the term "short sale" used when the discussion turns to the nose-diving housing market. I have always gone with the flow of the conversation, understanding that a short sale isn't a good situation for the seller, but I pretty much assumed it meant the house had to be sold quickly....WRONG!!!

A short sale is the lender is accepting less than the total amount due A Short Sale occurs when a homes sales value is less then the outstanding mortgage debt plus sales costs, and the mortgage bank(s) has agreed to write off a portion of the outstanding loan debt in order to consummate the sale.

So basically a short sale has nothing to do with time. You can think of "short" as the lender is willing to take an amount "short" of the amount borrowed on the house.

If you are about to lose your house to foreclosure, a short sale is something you can ask your lender to agree to. A short sale isn't a good situation for you or your credit, but it isn't as bad as a foreclosure. From what I understand, it would be like getting a "D" on a math test instead of an "F."

For more information on short sales or foreclosures, check out Mortgage Daily News.

Photo courtesy of realestatedoneright.info.