Some sellers have recently asked us about short sales and if they should do them.   Before they make that decision there are a couple of things you should investigate about short sales. 

First, what is a short sale?  A short sale occurs when you owe more than the property is worth.  If you want to get out from under it you put it up for sale and negotiate with the bank when you get an offer to see if they will take less than their loan amount.  For example, if you owe $1,000,000 and your home is worth $900,000 you put it on the market and get an offer for $900.000.  You then negotiate with the bank to take the $900,000 and you can walk away....or can you?

We have recently heard that many of the lenders that are agreeing to short sale terms are leaving the door open to recoup their losses from the seller at a later date.  Given the example above, that means that the seller may be on the hook for the additional $100,000 after they sell their house.  We have not heard of the banks collecting on this, as of yet, but simply leaving the option open.

We are not attorneys and are not qualified to make that decision for you, but if you are contemplating this I would strongly urge that you do talk to one that is experienced in this area. 

There are very few real estate agents that are truly specialized in short sales.  When we are presented with a short sale opportunity we will do the transaction, but farm the short sale portion out to a specialist at our own expense. 

If you are a buyer, the property will be delivered to you free of liens and encumbrances, so its not that big a deal.  You do however need to be very, very patient.  Banks are notoriously slow at getting back to you, so expect the answer to take as much as 6 months.

To short or not is ultimately your decision, but make sure to investigate this route throughly before you make the decision.