How to Find Short Sale Homes: A Guide for Buyers
Short sales can provide an excellent opportunity for potential homebuyers to score a good deal. If you’re in the market to buy a short sale home, you’ll need to prepare for a lengthy closing process and steel yourself to jump through some hoops not generally associated with traditional sales. And if you’re a would-be short sale homebuyer, you’ll also need to arm yourself with the knowledge of how to find short sale homes near you.
If you’re considering this type of home purchase, here’s our expert-backed explainer on what is a short sale home, what are the potential pros and cons of buying one, and how to find short sale home listings in your area.
What is a short sale?
A short sale happens when a homeowner needs to sell their house but owes more on it than it’s currently worth. This often occurs when someone buys at the peak of the market, and then the market declines.
The Great Recession of 2007 is a prime example of this scenario, and it created plenty of short sales. “People had done 100% financing on their homes,” says Jessica Wallace, a top-selling agent based in Santa Cruz, California, so they had zero equity when “the market dropped 10%.”
More recently, the first quarter of 2024 led to a significant increase in home equity. By Q1 of 2024, homeowners with mortgages saw their equity rise by 9.6% compared to the same period in 2023, according to CoreLogic. This growth in equity was driven by sharp increases in real estate prices. Additionally, the number of homes with negative equity dropped by 16.1% from the previous year, further reducing the potential for short sales in the market.
Why might a homeowner opt for a short sale? One common reason is if they’ve taken on too much debt through home equity loans or lines of credit.
For a short sale to proceed, the homeowner must persuade their lender to accept less than the home’s current market value, essentially “coming up short” on the sale. Lenders might agree to this because it’s often more cost-effective than going through the foreclosure process, especially if the homeowner can no longer afford to make payments and the property’s value has declined.
