“Real estate short sale” is a popular phrase among many these days. With the economy producing an increasingly awful real estate market, many institutions are looking towards real estate short sales as an alternative to going through with a foreclosure. The time it takes to sell a property is extremely high, and the prices on real estate have reached a considerable low. Calling the current real estate market a complete meltdown would not be unfair in some cases, such as in Detroit. This type of real estate atmosphere is the primary reason for needing an increase in short sale real estate opportunities.

A real estate short sale happens when a bank lets a property be sold for less than the amount owed on it. There are two different conditions that must be in place before the banks will agree to this. A property value that allows the sale price of the property to be too low to cover the outstanding balance of the mortgage is required. A further condition is that the owners of the property must not be able to continue making mortgage payments on the property.

For instance, an owner might have used an adjustable rate mortgage to buy a home for the price of 217,000 dollars five years ago. Two years after purchasing their property, the owners also took an additional mortgage out, to the price of 10,000 dollars. Also, we have to remember that in five years, the amount of time that the mortgages have been paid off is negligible. Further assume that the property is in a part of the country where market values have fallen to 215,000 dollars for comparable properties, and that the adjustable mortgage interest rate has recently increased from 7 to 11 percent. Finally, add the fact that one of the owners has just lost her job and the makings of a real estate short sale situation become apparent.

For a bank, a foreclosure can mean a lot of time and money spent that a short sale would not. The reason for this is that the banks believe it is better to get the property off their books and accept a smaller amount of money they are guaranteed to get than to accept an unknown amount in the future. If the lenders and owners do not agree on the terms of the sale, complications can result, but in general, that is how the real estate short sale works.

A real estate short sale is an unpleasant experience for an owner, but it is not the worst thing in the world. In terms of items that would reach the credit report, there would be far worse items, such as foreclosure. Real estate investors should understand that the short sales give them a wonderful opportunity to purchase property.