What is a short sale?

04 Nov

What is a short sale?

If you purchased your home during 2005 to 2007, the chances of you having equity in the house is very slim. When you are selling your home for the current market value that is lower than your current mortgage balance, the sale is defined as a short sale.

Benefit of Short Sale

Avoid Foreclosure
Impact less on credit scores
Will be able to obtain financing again for a home in less amount of time than a foreclosure on record

Why do people short sale their home?

Financial hardship

Many home buyers had a ARM (Adjustable Rate Mortgage) when they purchased the home. Many ARM’s are about to adjust or have already been adjusted. If home owners cannot afford the new mortgage payment, they sometimes choose short sale the house.

Joss loss

The unemployment rate in CA is about 12.4% ( When someone loses his or her job, it is very natural that he or she chooses to short sale the house.

Life change

When someone is relocating for job but don’t have equity in the house, they will need to short sale the house unless they want to come out with difference in cash.

Who’s paying the real estate commission?

The first lien holder

Key Points & Reminder

Most homes for sale in the market now are short sales.  The only thing short in the transaction is the amount owed to the mortgage lien holders, not the time of transaction or the sales price of the home (home needs to be sold at current market value).  Home owners short sale their homes because of many reasons but their common goal is to avoid the FORECLOSURES of their homes.

Finding a REPUTABLE REAL ESTATE PROFESSIONAL that will work for your best interest on a short sale is very important because there are many technical factors involved in the transaction.  Home owners should consult with tax and legal advisors before committing to a short sale because tax and legal ramifications might be involved.  In addition, keep in mind that not everyone will short sale their home and walk away owing nothing to the bank.  Most of the time, the bank will issue a unsecured note against the borrower(s) due to borrowers’ different circumstances.


Home owners sell their home for many reasons.  Unfortunately, many of the home owners today are selling their home short because of the unstable economy.  There is no shame for a short sale, but home owners need to be very clear with their expected goals and the outcome – AVOID FORECLOSURES.

Short sale is not a magic gateway to walk away from the house free but a way to solve current financial difficulties and save your credit for the future.

I cannot stress enough on the importance of finding a reputable agent because of the technicalities of the transaction.  You need to find someone that will work for YOUR best interests.


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