Short Sales Gaining In Popularity

From ClarkHoward.com

Short sales gaining in popularity

Short sales are becoming a more viable option for sellers, buyers and lenders alike. One in six homes that closed in February were short sales, according to new data. That's a huge jump from the same time last year, when they were practically non-existent.

For those who may be unfamiliar with the term, a short sale is where you work with a lender to actively market your home and sell it for less than the mortgage balance.

The advantages are that the buyer gets a home at a great price; the bank doesn't have to absorb the expense of a foreclosure; and the seller walks away with only a minimal hit on his or her credit -- much less than if they had gone into foreclosure.

Banks generally lose about 20 percent of the mortgage balance on a short sale. Compare that to the 50 percent loss of mortgage balance the bank takes on a foreclosure. Now that's quite a haircut!

One special warning for sellers. Be careful with the paperwork your lender gives you as part of the short sale agreement. Some lenders are behaving immorally and slipping in legalese that makes their financial loss your legal obligation to pay back. That is not the intent or purpose of a short sale.