Investors and savvy real estate buyers know that a short sale listing may denote a great deal waiting to be made. Conversely, it may speak of a lengthy negotiation process that scares off those needing or wanting to make a real estate deal quickly and easily.

A short sale is little more than a homeowner selling their real estate but with the understanding that the property may be sold for less than the outstanding mortgage that is currently recorded against it. Banks will usually agree to this kind of deal if the homeowner can demonstrate that she or he is unable to continue making mortgage payments and that the property is headed for foreclosure.

Although often vilified as foreclosing on a property quickly, banks actually shy away from this kind of business decision. Foreclosures are bad debts and no bank wants to have them on their portfolio. It makes the bank look questionable in the eyes of the FDIC and the very last thing that any financial institution wants to risk is inclusion in the agency’s watch list as a bank that might encounter trouble down the road.

To this end the banks will allow homeowners facing foreclosure to sell their homes for less money than they owe, hoping to recoup as much as is possible. The short sale stipulates that the borrower will walk away from both property and loan once the transaction is finalized, and the difference between the mortgage balance and the actual sale price is a forgiven debt. This permits banks to write it off their books.

Borrowers who got financially in trouble love this kind of deal; after all, a good chunk of money is forgiven, the credit rating remains intact, and the property is disposed of. It is therefore somewhat odd that not all borrowers facing the harsh reality of an impending foreclosure actually know about this option. Too few realize that there is help available and instead let their mortgage head for foreclosure, all the while unable or unwilling to seek out other options.

Even though not all borrowers who would qualify for this procedure apply for the program, there are those who apply but are not eligible to participate. The borrower wishing to avoid foreclosure and sell their home as a short sale listing must prove to the bank that they are indeed fiscally unable to cure their mortgage default and furthermore will not be able to sell their home for the amount needed to pay off the mortgage in full. While banks try not to make it too hard for the homeowner to comply, there is a certain burden of proof that must be met.

Buyers who seek to purchase a short sale listed piece of real estate usually know that the homeowner has already undergone the qualifying process. Conversely, they understand that the seller has their back to the wall and that there may be some more room for negotiation. Even if the bank will refuse to lower the price of the property any further, negotiations between the buyer and seller could very well result in repair work being done to the property at the seller’s expense. Thus, although the process of making the deal is slower, it does come with a number of fringe benefits! You can find out more about short sales and loan modifications on the site that we recommend: www.loan-modification411.com.