A short sale is an interesting process for selling and buying property. It typically occurs when a seller is on the brink of bankruptcy or foreclosure. From a seller’s perspective, it typically isn’t a positive experience and can be very trying. For a buyer or investor, a short sale can provide excellent opportunities to get a property at reduced prices. It isn’t the typical process for buying a property so we’ll go over how to buy a short sale.
What a Short Sale Is
A short sale is when an offer is made on a property at an asking price that is less than the amount due on the current owner’s mortgage. This type of sale is usually a sign that the seller is financially distressed and needs to sell the property before it goes through foreclosure. All of the proceeds of a short sale go to the lender. A lender then has two options to either forgive the remaining balance or pursue a deficiency judgment to require the former homeowner to pay the lender what they owe.
Learning How to Find Them
Most short sale properties are listed by real estate agents and can be found on their websites and real estate websites. Unfortunately, some listings that are short sales may not be advertised as short sales. Look for clues such as subject to bank approval, within the listing.
Prepare to Hurry and Wait
Short sales are not easy transactions. They are complicated and time-consuming for both the seller and the buyer. It can take weeks or even months for a lender to approve a short sale. On the other hand, if you find a short you are interested in you want to jump on the chance to make an offer before it’s too late.
Advantages and Disadvantages of a Short Sale
For a seller, there are advantages to a short sale on their property. It allows the homeowner to dispose of a property and sometimes the debt from it. It also allows them to escape a foreclosure that can be detrimental to their credit. It also reduced the fees a homeowner is typically required to pay when selling a home because in a short sale the fees are paid by the lender. The disadvantages for a seller are there is damage that can be done to the seller’s credit but not as much as a foreclosure, there is more paperwork, and if the lender does not forgive the seller’s debt they are responsible. For a buyer, the advantages are property at a discounted price, and the lender is eager to sell the property. The disadvantages for a buyer are that a short sale doesn’t always have the legal disclosures of a normal sale, it is up to the perspective of the buyer to identify any problems with the property, and putting in an offer isn’t a guarantee.
Are you looking to buy or sell your home, and looking to find the right realtors to help you do so? Reach out to our team at Drew Sineath & Associates, and we’d be happy to help!