Short Sale Definition
You have been contemplating getting into stock trading, and you came across the term ‘Short Sale.’ This article will be showing you the basics of Short sales and what there is to know about this strategy.
A short sale is the exchange of investment or stock that the seller does not control. To put it in simpler terms, it is a trade in which an investor sells borrowed insurances with the hopes of price deterioration. Once this exchange is done, the seller is expected to return an equal number of shares later in the future.
One significant advantage of this is that short-sellers profit from a drop in the price of a stock. The short sellers strive to sell shares while the price is high, then buy them later when the cost is reduced.
However, it is essential to know that Short sales ate assumed to be risky because they reduce profits while heightening loss.
SHORT SALE IN REAL ESTATE
A short sale in real estate is when a homeowner decides to sell their property for a cost lower than the amount due on the mortgage due to a financial crisis.
In this case, the buyer of the property is a third party to the transaction, and all earnings from the sale go to the lender.
Usually, there are two ways to go about this. Either the lender lets go of the difference, or they get a deficiency judgment against the borrower. A deficiency judgment implies that the borrower gets to pay the lender all of a portion of the difference between the original value of the mortgage and the price at which the property is sold.
Too many people confuse a short sale with a foreclosure. Although there are similarities, these two terms are different and so are their processes.
A foreclosure usually occurs when an owner abandons their property, and the payments are already overdue. The homeowner cannot make mortgage payments for a considerable period and has no choice but to evict their own home.
Be sure you are educated on short sales by looking up materials on what it entails and how to go about it.
Being in a sticky financial situation can become a challenge. As a homeowner, consider other steps before committing to a short sale. You may be able to negotiate a revised loan or payment plan with your lender. Ensure you are making the right decision for yourself.