Heritage Law Group
What is a short sale?
It does not take an expert in real estate to recognize that the worst case scenario a homeowner or other property owner can face, aside perhaps from an uninsured loss of the property, is the loss of the property due to inability to repay the mortgage or mortgages on the home.
Even though the process works slightly differently in California as opposed to states on the other side of the country, people commonly refer to the legal process of a bank taking back the property as collateral for a bad loan as foreclosure.
No matter what it is called, though, foreclosure is not a pleasant process for either a family or aspiring real estate investor to face. They may want to explore alternatives to foreclosures for a lot of reasons, and a short sale is one such alternative.
A short sale is in reality a complicated and unique real estate transaction that may call for a real estate attorney's assistance. However, to give a basic idea of how one works, a seller can ask the lending institution for leave to do a short sale if the seller is facing prolonged financial problems.
Generally speaking, the seller must also have fallen behind in payments and be upside down in the house, meaning the house is worth less than the balance on the seller's loans. Assuming the seller qualifies, he or she will likely have to fill out a lot of paperwork to get leave to list the house at a price less than the loan balance.
The end result of a successful short sale is that the seller can walk away from the house and the loan while the bank at least gets some money back on its loan, perhaps less than what it would have received in a foreclosure.