What Is a Short Sale of Real Estate?


Quick Answer

A "short sale" in real estate brings in less money than the remaining balance of the mortgage. This sort of transaction takes place when the borrower and lender agree that selling the real estate and taking a small loss is better than a loan default, as stated by Investopedia.

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Full Answer

For a short sale to occur, the borrower and lender must both agree, and in some situations, it is the best outcome possible. Borrowers get to keep a potential foreclosure off their credit history, and lenders do not have to pay the often substantial costs connected with the foreclosure process, according to Investopedia.

For people who are buying a home through a short sale, the prospect of getting a home well below the prevailing market value in an upscale neighborhood is a tempting one. However, once a buyer gets into the home, some problems can arise. A lot of people who are going through foreclosure leading up to the short sale take their anger out on the house, damaging floors, cabinetry, walls and other items just for spite. Even when malice is not a factor, neglect can take its toll on a short sale property, either because it has stood vacant for so long or because the last owners did not have the wherewithal or the motivation to maintain the property. It is important for buyers to get a home inspection before completing a short sale so they know the challenges that their new property brings, according to Bankrate.

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