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What Is a Short Sale?

If you’re one of the nearly 23% of homeowners whose properties now are worth less than the underlying mortgage loan and you find yourself in a situation where you have to move (a new job, perhaps, or because you can no longer afford the payments on this house and are hoping to downsize), the only way to sell your house successfully is either pay the bank the difference between the sales price and your mortgage balance out of your own pocket… or convince the lender to accept less cash than you actually owe.

That transaction is widely known as a “short sale.” Short sales might sound like a great deal for the seller, buyer and even the bank — or so a real estate agent specializing in those types of transactions may try to convince you. True, banks will probably be better off writing off a portion of an outstanding loan than foreclose on a property and take over the expense of maintaining and selling it, and a buyer is obviously getting a deal buying a home for a lot less than it was once worth, in hopes that in the future it will appreciate more. But the reality is, a short sale is neither short, nor easy to go through… and will have negative consequences for the seller’s credit score and, possibly, overall financial situation.

While a short sale may make sense for some, the pros and cons should be weighed carefully before you get the ball rolling. In this infographic, we walk you through the basics of short sales, who should consider one and the typical steps in the process.

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