What's a Short Sale?

Ever heard of a "Short Sale"? Most people haven't yet, but you're likely to. The article on the front page of the Real Estate section of today's Seattle Times/P-I does a very good job of explaining short sales and their implications. If you have a chance to pick up a copy, I recommend you read it. Unfortunately, they didn't publish it on their website (at least I couldn't find it), so I'll give you a quick introduction here.

In a nutshell, a short sale may occur when the homeowners need to sell their home for less than the amount of their loan. For example, they bought their home a year or two ago when home values were still appreciating at a phenomenal rate (they are still appreciating, just not as quickly). Let's say they paid $400K. Now, for whatever reason, they already need to sell and move, but home values have gone down somewhat in the past year so the current market value of their home is $375K -- roughly $25K less than they owe. A short sale occurs when the bank agrees to accept this lesser amount. The sellers may be required to sign an unsecured note, promising to pay the balance at a future date, or the bank may agree to cut their losses and forgive the difference.

These sales can get complicated because the bank requires that they have final approval of any offer and buyer received. This takes much of the power and authority for the sale out of the hands of the current home owner. It also lengthens the whole sale process because the bank often takes weeks, or even months, to approve the sale.

If this all sounds similar to foreclosure, it is, but there are significant differences which require too much explanation for inclusion in this blog. If you'd like more information, however, feel free to give me a call. 206-708-9800.