Retirement & Financial Planning Report

When you shop for a home now, you might be buying a home from someone who can’t keep making the agreed-upon mortgage payments. Typically, you’ll request a "short sale": you’ll offer to buy the home at a price that’s less than the current mortgage balance. Then the lender will have to agree to the deal.

Suppose the seller bought the home a few years ago for $250,000, using a $240,000 mortgage. That loan balance is now $235,000 but the home is worth much less than that. You might offer to buy the house for, say, $200,000.

In that situation, the lender will have to take a $35,000 loss on the outstanding loan. The lender might agree, to get some cash and to stop paying expenses for that home, but the process can take time. If you’re patient and the short sale eventually goes through, you might get a house at a bargain good price; the home also might be in fairly good condition because the former owner is still living there.