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What is a Short Sale and Why Does it Matter?

What is a Short Sale and Why Does it Matter?

Short selling is a trading strategy that shortens the lifespan of an asset in order to profit from the difference between its purchase price and resale. Shorting has been around since stock exchanges were created, but it became especially popular during the Great Recession. 

The short selling market has historically been dominated by hedge funds and other large institutional investors who are able to borrow shares at low rates to sell short while waiting for their investment time frame to expire. However, with the recession came a steep decline in home values nationwide which left many homeowners underwater on their mortgages; they owe more than what their homes are worth! This drastic change in financial situation led many Americans into short sales so they could get out from underneath this burden before it was too late.

The short sale market has been around for a long time, but the recent recession brought short sales back into prominence. With many homeowners struggling to make their mortgage payments, lenders saw short sales as an opportunity to recoup some of the losses they were taking on bad loans. The short-sale process is similar in most ways to a foreclosure.

Short selling is a process that many homeowners use to avoid foreclosure. It can be fraught with difficulties, but short sale benefits are worth the trouble. The short-selling process starts when a homeowner sells their home for less than they owe on it to an investor who will then take over the mortgage payments. This causes the homeowner's credit rating to suffer – but not as badly as if they just walked away from their property and let it go into foreclosure. For this reason, short sales are sometimes preferable over foreclosures during tough economic times like today's recession.

If you’ve been short on mortgage payments for a while and have little hope of putting your house back in order, short selling may be the best option. It can be an arduous process, but it doesn’t have to be as bad as foreclosure. Short selling is less likely to hurt your credit score than foreclosure because lenders need to approve the sale before completing it. This gives homeowners time to make up their minds and do some research before making any commitments.

There are many different reasons short selling can be a good option for homeowners. First, short-selling is usually less time consuming and more efficient than foreclosure proceedings.  Second, short-selling can help maintain the homeowner’s credit score, whereas foreclosures have been known to ruin them due to the negative history of being late on mortgage payments. Finally, short-selling will not result in any tax liability like foreclosure does.

If short selling sounds like the right choice for you, contact us today!

About The Author


United Tax Liens is a group of experienced, active investors providing everyday people with access to one of the best Real Estate Investment vehicles available today.

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