This home in Daly City is the best deal we saw this week. It’s a short sale and the bank is willing to let it go for $500,000. It worth more than that, though it does need some fixing up. Last I heard there were four offers being submitted.
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Wow, thats a really nice deal. When you say “short sale” what exactly does that mean? Just that its only going to be up for sale for a very brief time period, or does that refer to something else I’m not aware of?
Excellent question. Sometimes in our industry we employ phrases and simply assume everyone is privy to our dialect.
A short sale describes a sale where the lender is willing to sell short of what is owed on a property. Daly City for example is chalk full of short sales right now.
Say a person bought a home for $800,000 with 100% financing in 2005. With an interest only loan, they would still owe $800,000. Fast forward to 2008 and the same home is worth only $650,000. For whatever reason, these same folks can no longer afford their monthly mortgage payment. Perhaps they have lost a job or their interest rate (and payment) has adjusted beyond their means. Usually, these people have fallen behind on their mortgage payments too. In a hardship case, particularly in the scenario of a job loss, the lender may agree to allow the seller to sell the home for less than what is owed in order to cut their losses. Lending institutions are not in the business of owning and selling real estate, so in many cases they’d rather sell short of the full amount owed and accept $650,000 then end up taking the house back and selling it themselves. Hence the term short sale.