What is a real estate short sale?
A short sale occurs when you negotiate a sales price less than what the seller actually owes on a property. In other words a short sale is when a bank accepts less than what is owed on a property to keep the property from going through the foreclosure process. Instead of negotiating with the seller you negotiate a sales price directly with the bank. An example would be:
A seller has fallen behind on their payments to the bank. The seller has a mortgage note with the bank for $200,000. You write an offer of $150,000. If the bank decides to accept your offer you would have “Shorted the bank” $50,000.
The banks would be willing to accept a loss of $50,000 for a couple of reasons:
Banks are not in the business of owning homes they are in the business of loaning money.
If the property ends up going up for auction the banks will incur many more fees plus they may lose the opportunity to loan out the money that would otherwise be tied up in the property.
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Eric Medemar is a real estate investor from Grand Rapids, MI. Be sure to get your Free Guide To Real Estate Wholesaling. You can also view Erics real estate investing guide here.
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