Over the past couple of years, we've all heard a lot about short sales.  We all know they're out there, but what exactly are they? With a short sale, the homeowners owe more on their home than the home is actually worth, and, due to some type of financial hardship, they can no longer continue making the payments.  The homeowner's bank then agrees to let the owners sell the home at a loss (hence the term "short"), forgiving this deficiency amount.  A short sale is an alternative to foreclosure or bankruptcy and can often help preserve home values in the neighborhood.  If you are selling, keep in mind that you are asking the bank's permission to sell the home for a less than it's worth.  This will have a negative impact on your credit and you are advised to first speak with an attorney and/or your tax professional before deciding to do a short sale.  Once you've decided to sell, the home is listed with a realtor of your choice and your agent will then negotiate the sale on your behalf with the bank.

If you are looking to buy a short sale, you may get a great deal, but you should be prepared for some extra costs.  The seller will likely not pay for a home warranty, not make any repairs, not pay for termite clearance, and may not pay for overdue HOA fees (if applicable).  And, as a buyer or a seller, you should be prepared for the short sale process to take months to complete.