A short sale occurs when a mortgage lender agrees to accept less than the balance owed on a property’s mortgage. This option is typically pursued when the property owner faces financial hardship, prompting the lender to forgive the remaining loan balance. Short sales offer an alternative to foreclosures and bank-owned (REO) properties, providing distinct advantages in terms of the purchasing process.
Unlike foreclosures, where the lender repossesses the property to recover the debt, a short sale allows the lender to avoid the extensive paperwork and additional challenges of foreclosing and subsequently selling the property. For lenders, accepting a short sale can be more favorable than the lengthy and costly process of foreclosure.
Buyers interested in short sales should consult real estate experts to navigate these complex transactions effectively.