Buying and Selling Real Estate Tips - Structure Your Real Estate Short Sale Transaction
 A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this by forgiving the difference and/or releasing the mortgage lien on the property. Short sales are very common in many markets because of negative home owner equity due to the steep decline in house values.
If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and full satisfaction of the mortgage from your lender. Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them. The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage.
If you are a buying a home as part of a short sale, make sure the deal is closeable. It is estimated that approximately 30% of short sale listings are not closeable deals because the lender simply won’t approve it. In most of these cases that aren’t closeable, the first or second mortgage lender is expecting home sellers that have money to contribute something to the deal. One way to avoid getting caught up in the middle of this is to have your Realtor verify the status of the seller’s hardship package with their lender.
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How do you define a short sale? Because technically you don't have a short sale until it comes to closing and there is not enough money to pay off the lender.
For example, a house may be listed for sale at $500,000, and the outstanding loan amount may be $490,000. If the offer is above the loan amount then the property would not qualify as a short sale. There has been an inconsistent definition of a short sale, and what needs to get done is to determine when a short-sale should be disclosed.
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 Due to the rise of short-sale properties and foreclosures, a National Association of Realtors committee that meets next month is expected to consider new rules to better describe the status of properties in Realtor-affiliated multiple listing services.
Some local and regional multiple listing services have worked out definitions and disclosures about the status of properties and developed their own policies related to bank-owned foreclosure properties and short sales. Short sales are typically defined as transactions in which the lender agrees to accept less than the full amount due on a mortgage when a property is sold in order to avoid a costly foreclosure process.
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