Short sale is certainly preferable to the foreclosure process because of the difference of 2 years with short sale versus 7 years with foreclosure penalizing you for qualifying for a loan. Short sale means that you sell for less than your loan amount. The bank has to agree to it - subject to - but, more than that, you need to work with someone who is able to help you get that "forgiven amount" - the difference between what you owe the bank and what the property sold for - completely written off. Otherwise, you will get a 1099 at tax time and owe the IRS that difference. Not a pretty picture. Linda Doting Keller Williams Mountain Properties Edwards, CO

It sounds to me like you want to purchase their home and take over their payments on their existing mortgage? "Subject to" their mortgage? The terminology of foreclosures and short sales can be confusing.

If the Seller has equity in the home, or it would cash flow for you as a rental, a "subject to" offer is an option. An attorney should draft the contract for you. The Seller would need to become current on their payments in order to stop the foreclosure process.

Susan Rogers
Keller Williams Denver Central

Great question. We keep hearing that term in the news today. It comes from a situation where the owner of property is trying to sell their house for less than the amount that is owed the mortgage company. When the amount is short of the payoff we have a 'short sale'.

The 'subject to' portion is that the offer is 'subject to' the bank accepting the short payoff. Check with a CPA but with pre-foreclosures the affect on ones credit can harm someone getting a new loan for about 2 years while a full foreclosure could keep people out of a house for near 7 years. It is beneficial to the seller to avoid foreclosure at all costs.

Good luck.