A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. The homeowner is often behind on their mortgage payments and is trying to negotiate being released from his loan; this is often an attempt to decrease the impact on their credit rating. Sometimes the homeowner is not in default on their mortgage but the value of the home has decreased and the lender agrees to accept a payoff of less than the balance due on the loan.
In some real estate markets, less than one in 10 short sales close. Just because the home is listed as a short sale doesn't mean it's really for sale; because it's subject to lender approval. In some short sale situations there can be more than one lender involved which makes an agreement on a selling price difficult.
Often times the listing price of a short sale seems too good to be true. This is commonly the case, and this strategy results in multiple offers on the listing. Be aware if you intend to “lowball” the listing price your offer will not be considered seriously. It is best to have your agent look at comparables in the current market to reach a good purchase offer.
You need to be aware that the average time frame to close a short sale is 2-4 months. After the initial offer is submitted you will usually not hear anything back from the listing agent for 60 to 90 days. The lender makes no warranties on the home and it is sold “As Is” without the option to negotiate any repairs.