q about short sales.....possibly a stupid one.. - Posted by MikePA

Posted by ken in sc on July 25, 2003 at 07:32:11:

No question is stupid, although using the archives can often save you the trouble.

A short sale is when a homeowner who is behind on their payments sells you the house for less than they owe to the lender. It is called a short sale because the lender agrees to take less than what is owed to facilitate the sale, and not pursue foreclosure.


q about short sales…possibly a stupid one… - Posted by MikePA

Posted by MikePA on July 25, 2003 at 07:20:44:

Is a short sale in REI similar to a short sale in stock? i.e. selling stock that you don’t own yet expecting a drop in stock price at which time you’d buy it to deliver it to your buyer???

Not even a close comparison… - Posted by JT-IN

Posted by JT-IN on July 25, 2003 at 07:34:24:

The only thing that could even resemble a comparison would be if after you sold stock short, and then the value of the stock rose, and now you must cover your short position… if at that point you could negotiate with the Market Maker of the stock to acquire x shares at a lower cost to cover your deficit that exists with your current short position… Probably too confusing to even make comparisons, because the two are just not even close.

A Short Sale in RE is simply asking for a reduction in the indebtedness, which is usually higher than the value of the underlying asset; (house).

House is worth 90K, Mtg owed is 100K… Mr. Lender, how about accepting 80K payoff of the loan…? If they agree you have theoretically created 10K of equity for yourself, via negotiations… Short Sale.