Listing after listing in today's market reads, "Subject to Short Sale". I have taken this term for granted for years, as it has been a popular technique for investors to buy homes. Rrecently, however someone called me and asked, "what is a short sale" and I realized that Realtors were making the simple complex again. So, I will attempt to define Short Sales, simply.
A short sale is nothing more than an agreement from a mortgage company to forgive a portion of a loan to allow it to be sold before being foreclosed on.
Many homeowners in this market are selling their home while asking for short sales from their mortgage companies, The short sale allows the homeowner to list and sell their home for it's current value. Many ask why would a mortgage company forgive $10,000 - 100,000 from a loan through a short sale. The answer is it is good business. The average loss to a mortgaege company for a foreclosure is $80,000. So, if a mortgage company can short sale a loan for $50,000, they just saved $30,000. For the seller who receives a short sale, their credit is damaged less from a short sale than a foreclosure, and for the buyer they purchase a home for the current value or less. So, short sales can be a "win-win" for all. This is why many listings in this declining valuation market are being sold "Subject to Short Sale".