What Is A Short Sale And How Does It Work?

With all of the home buying terms being thrown around, you might be asking yourself, what is a short sale and how does it work? A "short" sale essentially means that you sell your home, but you sell it at a value that falls "short" of paying off the balance of your mortgage. A short sale can take place when homeowners want to avoid foreclosure on their homes. A short sale involves gains and losses for both the home owner and the mortgage lender. A short sale might be an option for you if you are unable to make mortgage payments on your home and you have suffered a hardship such as unemployment or an extended illness.  

A short sale will reduce the amount of money you owe to the bank, but it will also adversely affect your credit rating (though the impact on your credit will be significantly less than if you were to foreclose on your home). A short sale might also mean that you will still owe money to your mortgage lender after the home is sold, depending on the circumstances. Sometimes lenders forgive the remaining balance owed on your home, but they need to feel confident about the buyers. You will generally get the best deal from lenders if you are able to find someone who wants to buy your home and is also willing to work with your mortgage lender.

It can also help to use a realtor who specializes in short order sales. They will be familiar with the financial document you will be required to submit and the short sale process. The basic documents that you will need to prepare in order to do a short sale include bank records, tax returns, and a letter explaining your circumstances and why you are requesting a short term loan. The short loan process can take anywhere from 30 days to a couple of months if the application is incomplete. It is important to get a goof realtor and to be honest about your financial situation when applying for a short sale.