Short sales have been in the news a lot recently and most people do not understand the difference between a short sale and a foreclosure.  A foreclosure is a house that a bank has taken back.  The bank has title and they can sell the property.

On the other hand, a short sale is where a seller in the first stages of foreclosure – usually not making their payments and 100% or time they owe more than the house is worth.  When an offer is made on a short sale property, the bank has to agree to the sales price even though they do not have title.

A short sale usually takes up to five or six months to complete.  It has been my experience that the only short sales that work are the ones where the bank agrees before the property is listed for sale.

In most short sale situations, the owner puts the house on the market hoping the bank will agree to a settlement.  Even though it might make sense for the bank to take the offer, they might not simply because they are overloaded with short sales and most banks do not have the staff to handle these properties.

Several of our short sales have taken up to six months to get an offer on the property.  It has been my experience that a bank will end up selling the property once they own it for less than they turned down previously in a short sale opportunity.  It would make sense for them to take the short sale, but a lot of times they do not.

You also run into other expenses on a short sale because there are other liens on the property that are usually wiped out during a foreclosure.  For example, property owners dues – so not only do you have to negotiate with the bank, you have to negotiate with the association where property dues are overdue.  You can see why short sales are so complicated.

There is a company in Seattle, Washington that I have been working with that specializes in working with short sales and trying to get banks to accept these offers.  I think in the future we will be more successful on short sales than we have been in the past. 

I am often asked if the bank gives you 1099 if they accept less than you owe for the forgiveness of the debt.  It is my understanding that used to be the law, but that law has been changed by Congress recently and is no longer the case.