What is a Short Sale?
According to the National Association of Realtors®, a short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Short sales can be a good option for homeowners who have fallen into a hardship and cannot make their house payment. A hardship can result from job loss, divorce, death in the family, relocation, decrease in income, as well as other unforeseeable situations.
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.