When the economy is bad, more people cannot afford their mortgage payments and real estate short sales become more common. The idea of real estate short sales is quite new to most homeowners but it is not new to real estate investors. Real estate short sales benefit both the homeowners and the home buyers and maybe even the banks.

When a homeowner is upside down in his or her mortgage, he or she will often hear people pitching real estate short sales to him or her. An upside down mortgage is when a homeowner owes the bank more than the home is worth. If the home can only be sold on the market for $100,000, for example, the homeowner is upside down in his or her mortgage if he or she owes more than that amount.

Homeowners with upside down mortgages have one solution left to them; Real estate short sales. For a home that is upside down, even if the homeowner were to sell it on the market, he or she wouldn’t make enough money to pay off the mortgage balance and will still owe the bank even when the home is gone. This can be a real financial burden on the homeowner. Many people in this situation end up filing bankruptcy.

What all homeowners with upside down mortgage need are real estate short sales. With real estate short sales, the lenders are convinced to accept lower than the amounts owed. Say, Bob owes his bank $150,000 for his first mortgage. Bob’s house is now worth only $100,000. A real estate short sale is done and Bob’s bank is willing to accept $100,000 instead of demanding $150,000. You can see that Bob would be happy to not have to pay the extra $50,000 he owes.

The drawback is that Bob will no longer be able to reside in his home. Although, real estate short sales save Bob from having to pay out of his own pocket and even save his credit, the real estate short sales do not save Bob from having to move out of his home. The real estate short sales are always done by third party buyers. The banks are particular about not letting homeowners stay in their home to avoid them pretending that they could not afford the mortgage payments when they could.

Real estate short sales are not that easy to do. The third party buyer has to send many letters to the bank convincing them that the homeowner is really in trouble and cannot pay his or her mortgage payments. Usually banks don’t want to have to foreclose on the homes or deal with homeowners filing bankruptcy so they are likely to want to consider real estate short sales. Loss of jobs, medical bills, and divorces are great evidence in favor of real estate short sales.

Real estate short sales are not always successful. Sometimes, real estate short sales are not accepted by the banks. This may be because the buyers and the homeowners have not given enough proof that the situations are bad enough. Sometimes, the banks feel that they can do better auctioning the homes off in foreclosure sales instead of going ahead with the real estate short sales.