In my previous article I spoke about what type of situation was best for a short sale and how a homeowner can benefit. Today I would like to tell you why a bank would even go through with a short sale and address the question of if it can save your home.

Short sales are a fast and cost effective way for a bank to get out of a bad situation. One thing that you must know (which you already might) is that banks are in the business of lending money not owning real estate. This might come as a surprise especially since most of us equate real estate with its corresponding "value" but for banks cash is king. Let me explain. Once a property gets to the point of no return (an actual foreclosure or bank owned situation), the bank has to take possession and they have to enter it into their inventory as a “non-performing asset." Banks are only allowed a certain number of non-performing assets, and when it goes over that limit they are required to sells or get rid of these at a discounted price, which in fact adds to their loss.

A short sale can help the bank avoid many fees and cut their ties with a property much faster than if they took the property in as a non-performing asset. Some of the fees they can avoid are court fees, lawyer fees, property taxes & insurance (you own it, you pay it, doesn’t matter who you are), any property damage that occurs while they are in possession of the property, and much more. When you factor in the downward trend in today's market prices, the longer the bank stays in possession of a property, the greater their loss. If a bank goes through with a short sale they benefit much more than they could by going through with the foreclosure.

Now onto the second part of our question which is: Can a short sale save your home? While a short sale can save you in many ways, once it is completed, the possession of the home is transferred to the new buyer (an unrelated third party). At that point you must vacate and find a new place to live. We assist our short sale clients in finding a rental property right away until they can get back on their feet. If you see any flyers or ads that state, “We can save you from foreclosure and you can keep your home!” I would advise you to be very careful and do your research. It could be a scam. Financial worries can give you a feeling of desperation. I would encourage you not to make rash decisions until you speak with a qualified professional, like myself.

For more details watch this video on short sales:


In my next article I will explain if a short sale can save your credit and if you qualify for this process. So stay tuned there is much more valuable information to come.