A Short Sale is when a home owner, NEEDING to sell their home, cannot sell it for what is owed on the loan, so the lender steps in and will allow the sale to go through and possibly forgive the difference owed – or short.
A short sale is a term used by lenders and real estate people. Here is an example of a short sale. An owner of a home took out a loan lets say for $200,000. A few years passed, the home owner now NEEDS to sell their home. So, they call their friendly Realtor and find out what the going rate is. Usually, if you bought your home within the last few years, the Realtor will explain that if you sell right now, you will have to bring money to the table to pay off the loan debt. Sometime the pay off can be only a couple of thousand dollars, and sometimes it can be over $50,000. The home owner is upset to find out his home is worth less than what he thought.
He talks with his lender and finds out he can qualify for a Short Sale. He can actually sell his home for less money than what is owed on the home, and the bank will take the loss and may make the home owner pay back the debt, or the lender may forgive the remaining debt.