Tips About Short Sales
According to FreddieMac.com, “A short sale occurs when a property is sold at a price lower than the amount the homeowner owes on the mortgage, and the homeowner’s mortgage lender(s) agrees to the “short” payoff. A lender might accept a short sale with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the property.”
Basically, it is when the owner is underwater on the home, so their lender and owner come to the agreement of a payoff.
Why is a short sale necessary?
The owners cannot pay their mortgage, and this one of their only options left.
Is a short sale the same thing as a foreclosure?
No. The major difference for the seller on a short sale vs. foreclosure is the fact that a short sale will do damage to one’s credit score, but not nearly as much as a foreclosure would do.
How long does a short sale take to close?
Ironically, the sale of a short sale listing typically takes longer than that of a traditional listing. This is because “the seller’s mortgage lender needs to thoroughly review a seller’s short sale request. Gathering the required documentation and doing bottom-line reviews can take significant time to complete before a short sale is approved. Also difficult negotiations that take place between the parties involved, such as junior-lien holders and the seller, may delay the process” (FreddieMac.com).
What are some cons of purchasing a short sale property?
These listings are sold “as is” and it is rare that the listings agent will negotiate certain aspects of the home sale liker they would in a traditional sale. Again, this is a longer process than typical sales, which could be frustrating to the buyer. There are many obstacles throughout the short sale process that could lead to derailments or cause the sale to fall through.
There is a large chance of profiting off a short sale as a buyer if you can renovate and invest in the property to resell it, as well as getting a great deal!