What is a short sale?
Should I buy a short sale?
Sure. If you can find one.
A short sale is when a lender has agreed to let the owner sell the property for less than what they owe on the mortgage.
Say the owner owes $600,000, but the market value is only $500,000. That means the bank is willing to take a loss of 100k. Why? Sometimes letting the seller default is better than letting the home go into foreclosure where it could then sell for even less.
Short sales can sometimes be a good deal because they may not be in the best condition and they can take a few months to close, which the buyer can use for leverage.
But these days, they’re really rare. That’s because home values have risen enough where most people aren’t underwater. The next time we have a market correction though, you can bet you’ll see more.