Stupid Question - What is a Short Sale

[Shiela Zhao]

So hate to come on hear and ask but trying to wrap my head around short sales and the technical jargon isn't making it easy. I've heard about short selling stocks but not sure how it works on real estate. Thought it might make things easier for my seed capital if I'm purchasing a property from a short sale based on what I've read but could use some help from the pros! Appreciate it in advance!

[Brandon Johnson]

From what I understand, short selling in real estate means selling a property for less than the amount that is owed on the property. For example: You buy a home for $100,000, put 10% down and take out a $90,000 dollar loan with your bank. Well 6 months after you buy the market takes a steep turn and takes your home value right down with it. Your home is now worth $70,000 dollars while you still owe far more than that to your bank. Sometimes a lender may allow and allow you to sell the property for only $70,000 dollars even though you owe them almost $90,000. 

As far as the ins and outs of short selling it will boil down to the wants and needs of the current lender on the property. To do anything you have to jump through the hoops that they put in front of you.

I hope this answer help.