What is a Short Sale?

Foreclosures can be messy, unpleasant affairs for everyone involved. Obviously, the most devastating aspect for the Mortgager (the homeowner) is the loss of his house, which is inevitably a painful, demeaning experience. But that is not the only negative effect of Foreclosure on a homeowner: he also suffers a major blemish on his credit report which will significantly lower his Credit Score, and he loses any equity which he had invested into the property prior to defaulting on the Mortgage. With all of these factors combined, Foreclosure can be an extremely difficult calamity to overcome.

However, what many people do not realize is that a Foreclosure is also undesirable from the lender’s perspective. Foreclosures entail significant fees for the lender, especially if they must utilize the court system as a part of the Foreclosure process. In many cases, lenders are extremely eager to avoid that long, drawn-out process, but they also (understandably) want to recover the amount loaned to the homebuyer. If the Mortgager defaults on his loans and has no evident means of repaying the remainder of his debt, and yet the lender wants to avoid Foreclosing, what alternative is available to the two parties?

The answer is a Short Sale. A Short Sale is a means for the Mortgager and Mortgagee to avoid the costly, painful process of Foreclosure in a way which benefits both parties. The homeowner will walk away without the devastating effects of a Foreclosure and the lender will receive a greater percentage of the amount due than it would if it pursued a Foreclosure. So what is a Short Sale?

Essentially, a Short Sale is an agreement between the lender and homeowner which states that the lender will accept a lesser amount than is owed. The homeowner then sells the property, at a lower price than the amount owed, and turns over the proceeds to the lender. As a result, the lender receives a sizable portion of the money due to it, and the seller avoids the stigma and damage to his credit score which accompanies a Foreclosure. Additionally, oftentimes the seller will receive a modest sum of money at the completion of the Short Sale, depending upon the agreement with the buyer.

This buyer will almost always be a Real Estate Investor who specializes in Short Sales. The Real Estate Investor assumes possession of the home at this discounted price with the intention of selling the property shortly thereafter. Because the Investor acquires the home at a low rate, he is able to sell it at or slightly below market value and still reap a considerable profit. That is why a Short Sale is such a great option for Real Estate Investors to pursue: they offer the possibility of a speedy, substantial reward. In fact, Short Sales offer the potential for bigger profits than you can find in virtually any other aspect of Real Estate Investing!

However, Short Selling can also be a tricky, potentially frustrating process. Any Investor who chooses to pursue a Short Sale must be prepared to encounter unreasonable bank negotiators, stubborn and unrealistic homeowners, the need to quickly accumulate Investment Capital, and properties which will require a significant amount of refurbishing prior to selling. No Real Estate Investor should attempt to execute a Short Sale without a complete understanding of the steps involved and the work which it will entail.

If you are genuinely interested in learning more about Short Sales and potentially becoming a Short Seller yourself, you need to educate yourself. I strongly urge you to consider my Short Sales Magic Home-Study Course. This is a comprehensive program which you can consult in your own time, designed to teach you everything you need to know about Short Sales. And if you would like an even more in-depth, personalized instruction, my Short Sales Boot Camp is currently accepting reservations. Whether you’re an experienced Real Estate expert or a beginning Investor, both my Home-Study Course and Boot Camp are great options for anyone interested in Short Sales. For more information, please visit www.shortsalesmagic.com