Short Sales in Recent Context...

The national foreclosure crisis affected nearly 938,000 properties in the July-September quarter of 2009. The collapse of the mortgage lending market along with rising adjustable rate mortgages and falling real estate prices across the United States have contributed to the largest foreclosure rate in decades. Banks are inheriting homes instead of earning loan interest, and former homeowners are left with nothing but poor credit scores.

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Both sides mutually benefit - a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt.