Women like to shop!
Women love to find bargains and discounts and things on-sale.
So do we as men, but women are often on a shopping mission.
A short sale may be a real bargain! It's something sold at a discount from what it normally costs. It's on-sale. It's meaning is within it's phrase, "Short"-sale: Short of a whole sale. A sale for less than the whole amount.
If I owe you $100 and you accept $70--I paid you short.
A deficiency is the difference ($100-$70=$30) in what is owed and paid. So the deficiency is $30 in our example.
If you find yourself troubled by your current financial situation or find yourself behind in making your monthly payments, when you take the time to analyze your situation you will probably discover that most roads lead to foreclosure.
As you dig deeper for answers and solutions to the problems and challenges you face, even though you may still have some tough decisions to make--you may also find you have more choices than you thought?
If you're facing foreclosure one of your choices is the short sale.
A short sale is a sale in which the person who lends you money is paid back less than what they lent you. The unpaid amount is called a deficiency. A deficiency may have legal or tax ramifications that can hurt you financially. So you will want to speak with your advisors.
For example, let's say your lender lent you $100,000 to buy your house. Two years later the house goes down in value by $40,000 due to market conditions. Later you encounter some sort of hardship condition like an illness or job loss. You need to sell!
Let's also say the highest offered price for the sale of your house is $42,000. You show the contract to your lender. Let's assume your lender grants you permission to sell the house. Then you would have just completed a successful short sale.
Your lender just accepted a short sale of $42,000 for the $100,000 they lent you. The deficiency would be $58,000 ($100,000-$42,000=$58,000). That deficiency may or may not harm you.
Although there is no perfect solution to foreclosure, relatively speaking, everybody wins with a short sale.
You avoid foreclosure, save your credit and probably avoid bankruptcy. The buyer just purchased the house at a discount. The lender just got cash for a non-performing note.
For any number of reasons a lender may or may not do a short sale. And often their decision will have no basis in reality.
Short sales happen because those involved want to make lemonade out of a financial lemon. It's sort of like an amicable divorce. It's a way to bring a business relationship to an end in a way that all parties are, kind of, in agreement. In any case, some of everybody's needs are addressed.
Short sales are far more complex than this for sure, but this does describe the basic dynamic.
The devil of course is in the details.
Having said that: Is a short sale right for you? Maybe or maybe not.
To find out, read my article with that exact title: Is a short sale right for you?
