Short Sales are properties that are being sold for less than what is owed to the mortgage lender. Short Sales must be approved by the lender(s) before the transaction can be completed. Rather than go through the expense and legal process of foreclosing on a property, many lenders are willing to allow the property to be sold at a loss to a qualified buyer. Many short sales are not appropriate for home buyers who have an immediate need for housing.
It can take weeks or months to get approval, or even a counter offer from the lender(s). It is not uncommon to find short sale properties listed in the MLS for a price that the lender has not approved. A number of properties are priced at a point that the lender has previously rejected and is not currently willing to accept. For this reason, most short sale buyers have been real estate investors, who could afford to wait for a protracted period, in order possibly receive a better deal.
This situation appears be improving, with new government programs that provide financial incentives for institutions to consider short selling, rather than foreclosure. A number of short-sale properties have approval from the lender for sale at a price under the loan balance.
While short sale homes generally sell under market price, in the Houston area, the discount is often not as significant as many buyers expect. It may also be counter-balanced by condition issues in the property due to deferred maintenance and neglect. This is most common in rental properties that may have been abused or vandalized.