A short sale is when someone sells a piece of real estate for less money than they currently owe on it. Typically this only happens when the market value of a property has dropped significantly and the owner of the property has fallen behind on their monthly payments.
For example, let’s say I’m the owner of a home that I bought for three hundred thousand dollars, and I still owe two-hundred fifty thousand dollars on my mortgage. Everything’s going fine, until a natural disaster strikes my area. I get laid off from my job and can’t afford to pay my mortgage for several months.
Because of the damage to my area, the value of my home plummets to just two hundred thousand dollars, fifty thousand less than I owe. In this scenario, a short sale would allow me to sell the home for two hundred thousand dollars and avoid many of the negative consequences of a foreclosure.
Have an experience with a short sale? Share it in the comments!