What is a short sale?

A short sale is a situation where a homeowner is attempting to sell a home that is worth less than the amount owed on its existing mortgage with their mortgage lender accepting the loss.  The homeowner’s mortgage holder must approve the sale. It can take an additional 30 to 90 days to obtain the lender approval for a short sale offer.

In Texas, there is a Short Sale Addenda that is used with the standard Texas Earnest Money Contract.  The Short Sale Addenda gives the seller and their lender a stated time period in order to approve the sale or the real estate buyer has a right to unconditionally terminate the contract and have their earnest money returned by the title company.  The time period for approval is negotiated by the buyer and seller and typically ranges from 30 to 90 days.  Most short sales are purchased by investors as the typical home buyer is unwilling to wait 30 to 90 days to know if their contract offer will be approved by the lender.