After a short sale the homeowner may still be liable for the difference between the amount owed on the mortgage and the amount of the sale. This is referred to as a deficiency. If a deficiency comes into place, the lender may sue for collection of the debt. Read the rest of this entry

In the real estate market today, finding a property where the seller is in default is not a difficult task. Default can be defined as the outstanding mortgage balance being higher than the value of the house. To profit, the investor may offer an exceptionally low price, get it accepted by the bank, and attempt to quickly sell the property an end-buyer. This technique, when successful, can yield impressive profits. Unfortunately, trying to this with short sales can be challenging for several reasons. First, the lender must approve the offer. Second, even if the investor can negotiate with the lender to accept the offer, if they have an inclination of a back to back closing the lender may not allow it.
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The motive for a short sale or a foreclosure is essentially the same. The homeowner can no longer afford the mortgage payments. A short sale is any sale that closes at a price below what it is owed. In order for this to occur the homeowner or a hired representative has to negotiate with the lender to accept a lesser price. The foreclosure process puts the property in the ownership of the lender. It then becomes part of the long list of REO (real estate owned) properties. The lender will eventually hold an auction and hope to find a buyer. To help understand how a short sale would differ from a foreclosure it may be helpful to point out that short sales can also be referred to as “pre-foreclosure sales” which precedes the home being officially repossessed or foreclosed on by the lenders. Lenders encourage short sales over foreclosures because they generally net more from them, since foreclosures incur additional marketing, legal, processing and carrying costs.
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