Short Sales, What Are They???
Okay so this is a VERY newbie question, but what exactly is a short sale? This whole concept just hasn't made much sense to me! Sorry for the dumb question
Okay so this is a VERY newbie question, but what exactly is a short sale? This whole concept just hasn't made much sense to me! Sorry for the dumb question
A Short Sale is basically getting the lender to accept les than what is owed on a property as payment in full.
Read up on them in the short sale forum.
Jeff
Welcome!
They are one of the more complicated investing techniques, but I'll expand a bit on what has been said.
Short sale is when a property owner is behind on their mortgage payment and foreclosure is approaching. At that point they can't refi, they've racked up thousands of dollars in late fees, filing fees, attorney's fees, etc and so often times they'll have to pay money even if they were to sell the property as they are "upside down" in the property.
Banks hate foreclosure as it takes up lots of time and money. They want to be in the lending business, not the foreclosure business.
Foreclosure is worse for someone's credit than bankruptcy.
In comes the investor. They offer a bank $200K on a $250K home where $240K is owed. The bank accepts the offer, the investor has his buyer close the deal (at $240K selling price), and he gets a handsome profit.
The buyer gets a discounted price, the seller avoids foreclosure, the bank saves time, money, and headaches, and the investor makes money.
There are variations to how all of this might flow, but that's the basic idea.