What is a short sale? If I could got a dollar for each time I get asked that question, I would be almost rich. Before our recent recession, which had the strongest negative impact on the economy since the great depression, short sale was pretty much unheard of. Annual appreciation of value in our homes was almost predictable.
The increase in unemployment contributed to owners falling behind in paying their mortgages and often losing their homes to foreclosure.
Short sale became one of the ways that the banks and home owners could mitigate their losses in the ensuing real estate market.
Home owners had to prove to the lenders that they were in dire straits and unable to meet their obligations under the mortgage agreement. That is how short sales became a prominent part of the real estate market since 2008 and continues.
The recession brought an unprecedented loss of value and therefore equity, in every community in the United States. As a result, owners were left with mortgages to pay on homes that had steep depreciation in values. In many cases they now owed a lot more that they could sell the house for.
Lenders when faced with a situation where the home owners were unable to pay their mortgage, and the houses had lost significant values, sometimes agreed to allow the owners to sell their houses for the current market value.