Jeff’s Carlsbad Blog for First Time Home Buyers

FAQs – Part 9 (Short Sale)

Posted in FAQs by Jeff Dowler on November 22, 2006

for-sale-sign.jpgWhat is a Short Sale?

This is not really a common question, at least it hasn’t been in the market over the last few years due to climbing prices. But with the market slow down, and with many people buying in the last 2 years at the peak, we are now seeing more “short sales,” so it is something you should know about; you may come across this while house hunting.

Simply, a short sale occurs when the financial obligations on the house (the loan owed to the bank) are greater than what the house can be sold for.  This will likely be more common if someone has not been in the house for long, bought at the peak, and did not invest much money in the purchase (downpayment) and/or took out a secondary loan (e.g., home equity) after the purchase. Since the sellers owe more than the market value, this is referred to as a short sale.

A short sale can represent a possible good deal for a buyer, since the level of motivation to sell is high and the price to get the home sold (often due to a relocation or other family circumstances) may be lower than market. However, the big negative is that a short sale is SUBJECT TO THE LENDER’S APPROVAL. This can take quite a bit of time and, of course, may not be approved, in which case you cannot proceed with the purchase. So, don’t necessarily write off a short sale home if you tour one and it meets your requirements, but be aware that there are risks. Talk with your REALTORto understand more before you proceed. There are ways to work through a short sale successfully. Much will depend on what the seller owes and what the bank is willing to accept.


2 Responses to 'FAQs – Part 9 (Short Sale)'

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  1. […] info by jdowler on the January 15th, 2007 This is NOT a suggestion that you not consider a short sale property for purchase. I think many of them can be a good deal for you, if you do your due diligence, the […]

  2. […] If you are not familiar with short sales (there are lots of them, in many markets) or want a refresher, check out my post on the subject. […]

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