Why they call it "Short Selling" homes?

Discussion in 'Economics' started by crgarcia, Oct 15, 2007.

  1. You cant "borrow" a house that you don't actually own. Much less to sell it.

    You can't purchase an identical house later to pay the house you borrowed.

    So why they call early sales of troubled mortgages' homes a Short Sell?
  2. i believe its when:

    the lender agrees in advance to accept a "short sale." the sale price falls "short" of the outstanding loan balance, but the lender agrees to accept the proceeds as repayment of the loan.
  3. \\\Bad terminology, I agree. But it has nothing to do with shorting as we traders know it. The above poster gave a good definition.
  4. vacation


    As in "short change", not as in the stock transaction. The sale comes up short on the mortgage balance. That's all.
  5. Arnie


    QQQball is right. One thing to keep in mind is that any debt "forgiven" by the lender is considered income by the IRS. On top of losing their house, the borrower gets a 1099 at years end for the loss to the lender.
  6. The terminology in real estate is misleading with regard to bid/offer. Most people say they make an offer on a house. If you're buying, you make a bid on a house, not an offer. But that's the prevailing lexicon.
  7. Is that income subject to social security taxes?

    What if you are broke? How would you pay the IRS the taxes on debt forgiven?

  8. IRS rules state the short sale is a profit for you because the balance you were due to pay was forgiven. It's much simpler and easier to file a bankruptcy. Depending on which state you reside, you can go up to 12 months without paying rent by postponing your hearings.