A “short sale” in Washington State real estate agent parlance is selling during the pendency of a foreclosure. It involves convincing the foreclosing lender to accept less than the full amount owed.
One of the things to watch out for here is a fairly subtle manipulation by the real estate agent to profit by the situation. The case I’m familiar with involved a home owned by a very unsophisticated woman. The real estate agent disclosed that a relation was the buyer and that the sale was “a short sale.” The owner did not understand what this meant and signed the papers offered to her, again relying on her agent and not understanding the terminology of the contract.
She was next told to come down to sign the papers for closing and that there would be no money for her. When she objected, the agent gave her verbal promises that she would receive three thousand dollars after closing but declined to put it in writing.
It turns out that she would have received over ten thousand dollars except that the addenda to the contract provided that she would pay all the buyers’ costs of the loan and settlement charges. It also provided that almost $6000 would go to the Nehemiah Down Payment Assistance Program, which according to the closing agent is a program to refund the buyer’s down payment.
This lady had no understanding that, while she got the price she wanted, over ten thousand dollars of the money was going directly for the buyer’s benefit.
In this way the buyer gets the home for absolutely no money out of pocket and the owner gets nothing. The real estate agent gets the commission. The buyer though is left in the same position as if there had been a foreclosure, except that her credit report will contain reference to a “short sale” rather than foreclosure. What the seller has lost is time that might have been spent trying to make a sale that would give the buyer some money to at least move.