A short sale is when a buyer makes a proposal to purchase a house from someone with financial difficulties before the foreclosure auction occurs. Typically foreclosure auctions have set dates when they are to occur, and because these dates are public knowledge individuals can make offers to the owners of a home before it goes to a foreclosure auction. There are numerous advantages attained by both the buyer and the seller through the participation of a short sale.
The seller of the home no longer has to worry about a foreclosure ruining his credit for life. This may seem like a relatively insignificant thing, but in our world of easy credit it is in fact quite the opposite. If the homeowner has any amount of equity vested in the property than the deal is made even sweeter because the homeowner may even get a small amount of money out of the sale of the home.
The buyer of the home is at a great advantage because they will be getting the home significantly under market value. Sometimes the prices in a short sale are up to 40% discounted, but what advantages does a buyer in a short sale have as opposed to a buyer at a foreclosure auction? The buyer in a short sale will have the opportunity to inspect the house before purchase, this small factoid is also seemingly insignificant until you realize that at a foreclosure auction you do not have this option. To make matters even worse, homes that appear at a foreclosure auction are always owned by people that have missed payments on their mortgage, and these people have a tendency to not properly maintain their home. Another great part of the short sale is the the original owner has no right of redemption to the property, that is they do not have the ability to repurchase the home after you have made the purchase.
In order to make a short sale work, it is often important for the buyer to cater to the seller a little bit. This can be as simple as letting the previous owner continue to live in the house until they find another suitable location to live, or as complex as having them fix up the house in exchange for a reduced rent to stay there. The beauty of a short sale is that almost all options are open if the buyer and seller are both committed to a sale.