Struggling to pay for your home? (photo by Ramzi Hashisho)
What is a Short Sale?
Dictionary.com defines it as “an act or instance of selling short.”
Boy that helps a lot. Doesn’t it. So what is selling short? Umm … good question. The simple description is that a short sale occurs when the money received for the product doesn’t cover the amount that is owed on the product.
I know that’s as helpful as a box of mud. (Which is why I’m hosting a collection of Short-Sale Seminars to assist you in this process.)
Let’s try to look at it from a graphical standpoint.
| Traditional Sale | Short Sale | |
|---|---|---|
| Purchase Price | $100,000 | $100,000 |
| Amount Owed to Bank | $95,000 | $90,878.11 |
| Property Taxes* | $1,761.64 | $1,761.64 |
| Closing Costs* | $1,361.25 | $1,361.25 |
| Real Estate Commission+ | $6,000 | $6,000 |
| Buyer’s Profit (Loss) | ($4,121.89) | $0 |
* – Used Title First Net to Seller Sheet, assuming $2,000 year taxes and closing on May 21, 2010; + – commissions are always negotiable, 6% is used an example.
Note the amount owed to the bank. How can you owe less on a short sale than a traditional sale? That’s where it gets fun. Basically, the home’s seller contacts the mortgage holder and requests that the bank accept less for the home than what is currently owed on the property. (In the example, I wouldn’t advise a short sale, but if the house had sold for $75,000 you’d see how this would have become a very different result.)
The short-sale process is a very challenging one for everyone involved. But I’ll try to break it down with periodic updates to the page.
- Help I think I’m Falling Behind on My Mortgage
- Wishing We Could Wash Away the Debt
- What is a Financial Hardship?
I am not pretending to be an expert in this field. I have earned several designations – Certified Real Estate Professional and Short Sale Foreclosure Resource – to help me become more educated. However, I am not an attorney, tax accountant, or financial planner and it is suggested that you seek their council in this process as well.
Toby Boyce, MBA, is a licensed real estate agent in the state of Ohio under the Keller Williams Consultants Realty brokerage. Boyce, propietor of the Ohio Home Team, has been a full-time real estate agent in Central Ohio since 2006. 
