What is a short sale in real estate? What is the difference between foreclosure vs short sale? A real estate short sale is when the money earned from selling a property is less than the debts.
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This occurs when the property depreciates over time and the owner must sell the property.
The country saw the biggest spike in short sales during the 2006 economic recession when property prices dropped.
Homeowners, who were impacted by the recession, suffered financial hardships and had to sell their homes because they could not afford the mortgage rate.
Because homeowners sold their property at a lower price than what they owned, the transaction was a short sale.
This created problems between homeowners and their mortgage loan lenders, such as banks.
Depending on the situation, the debts unpaid were forgiven. Banks base their forgiveness decision on the property owners' current financial status.
If there's no way they can repay the money, often times the bank will forgive the property owner. But, this isn't always the case.
Short sales will mean you don't earn back all the money you spent on purchasing a property. When this happens, it's often a sign of devalued property.
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What is a Short Sale?
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