First of all, what is a short sale? When an owner owes the bank more on his mortgage than the property is worth, then he is “upside down”. The only way to sell the home is for the owner to bring the difference owed to the table at closing or for the bank to “forgive” the difference in a short sale.

At first glance this sounds like a good deal for everyone. The seller avoids foreclosure, the bank has a buyer who will now make payments, and the buyer, hopefully, got the home at a great price.

Here’s how it shakes out in real life. The seller still takes a substantial hit on his credit. But he does get to walk away from the property. The bank loses money, but probably not as much as if the property had gone through the foreclosure process. The buyer gets the home for the new market value, which is less than what was owed.

However, that new value IS the value. Because if the bank could have sold it for more, they would have. Therefore, what the buyer pays is now what the home is worth. It is typically not such a steal that the new buyer can turn around and flip the property for more money.

The other problem with a “short” sale is that it can take a “long” time. There are countless hoops the seller must jump through before the lender will agree to the short sale. Most of those don’t begin until there is a contract on the property. So the buyer sits in limbo for months while the process drags its way through the bureaucratic system. A quick short sale might be 60 days. A more typical one four months plus. And it isn’t unusual to wait six months for a response from the bank – which might still be a rejection or a counter offer to the contract.

So while short sales may SEEM like a great idea, they are, in fact, a time consuming and frustrating experience that MAY have a good outcome for those patient enough to see it through.