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What is a Short Sale

A short sale is a property that sells for less than the balance owing on its mortgage. A short sale can be an underwater, an apartment building or even vacant land. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.

A Short Sale is a Privilege, Not a Right. Not every property qualifies as a potential short sale in a bank’s eyes. A bank must agree to grant a short sale. Banks are under no obligation to approve a short sale. Banks will grant a short sale if the bank feels it is in the bank’s best interest to approve the short sale.

It is in the bank’s best interest to approve the short sale if the bank will make more money through the short sale than to foreclose. It is estimated that banks might save 25% to 30% on foreclosure costs to grant a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.