Definition: A Short Sale by definition is when the lender or lien holder agrees to decrease their payoff (the amount owed to them) to allow the home owner to close on the sale of their home.
A short sale is simply the bank allowing the sale to happen. Of course, they monitor every possible term in some cases.
It’s simply a debt that is being allowed to be satisfied for less than what is owed.
A short sale is not a bank owned property, it a partially bank-controlled property. The bank has an interest (in collecting interest).
The bank has to agree and because they are a bank, they act like a bank. If you know anyone who has ever done a short sale with a non-bank (think home equity line with Chase), they don’t act like a bank. They act like a lender, as in, they don’t want to settle without calling you, your boss, your kids, sending you on a guilt trip, asking for pennies just to get something out of you.
Luckily, most people have loans with banks and banks don’t want to foreclose.
A short sale is simply a settlement. There’s terms to be mindful of, here’s a few:
1. Payoff Amount
2. Deficiency Amount – are they “coming” for the rest
3. Credit Reporting – what are they going to tell your bank
4. 1099 Amount
Short sales can be the superior deal on the market at times. They are typically a hassle but well worth it.