What are Real Estate Short Sales?

Before we discuss how to do real estate short sales, we first should define what real estate short sales are. The concept of real estate short sales is hard to grasp in the beginning because it is hard to believe that banks will actually accept short sales and forgive debts owed by the homeowners.

Definition of real estate short sales

In simple terms, real estate short sales refer to the process of negotiating with mortgage lenders for them to accept as paid in full less than the actual amount of mortgage owed.

For example, if a homeowner owes the bank $100,000 in mortgage for his/her home, a real estate short sale is when someone negotiates with the bank on behalf of the homeowner for the bank to accept less than $100,000 for the balance of the mortgage. If the short sale is successful, then the homeowner can walk away free and clear.

What do Real Estate Short Sales really mean?

Most people are surprised to know that when they owe the bank more than their home is worth, there is a way out. Through real estate short sales, homeowners who are upside down in their mortgages (owe more than the value of the home) have a way out.

For example, a your home is worth $50,000 now. In another word, if you were to list your home on the market today, it will sell at most $50,000 or a similar figure. However, if your mortgage balance is $100,000, even if you sell your home, you will only be able to pay the bank half of what you owe. So, what can you do? You can sell you home and come up with the difference by yourself out of your own pocket or you can do a real estate short sale and don't have to pay anything out of your own pocket.