More and more sellers and buyers are taking advantage of the popular sales option known as the short sale. In simple terms, a short sale means selling property short of the loan balance.
In these troubled economic times, many people are faced with the loss of a job or unexpected medical bills they cannot pay. In order to avoid the devastation of losing their homes, struggling homeowners may consider the option of a short sale rather than allowing them to go into foreclosure.
By deciding to pursue a short sale option, the owner and the lender must agree to sell the property short of the loan amount. A short sale can only take place prior to foreclosure. There are specific steps to follow for selling and buying a short sale property.
Procedures for Sellers
Many banks and other lenders are overwhelmed with the number of foreclosures on the market today. Because banks are not in the home-selling business, they are willing to work with the homeowner to sell the property at short sale thus avoiding the enormous amount of legal paperwork and expense that goes along with foreclosures.
When a home goes into foreclosure, the costs for the lender and the borrower are extensive.
The seller also faces an unavoidable negative credit report as a result. Lien holders that agree to a short sale do so when it is clear that the property owner cannot afford to repay the full amount of the loan.
By agreeing to allow the short sale to take place, the lien holder also agrees to release the lien on the property and accept less than the full amount owed. The first step to take in this process is to contact the lien holder and explain the reason for wanting to pursue a short sale. This gives the property owner an opportunity to make a new start.
Procedures for Buyers
A short sale property gives the prospective buyer an opportunity to purchase a home that has an upside down mortgage. The buyer must understand that the seller is not the one to make the final decision regarding offers, because of legal reasons.
Unlike regular real estate transactions, the lender must approve all contract terms. The buyer should contact a reliable real estate agent to obtain a comparative market analysis prior to considering making an offer on a short sale property. It is important to know the true value of the property in order to make an informed decision. Make an offer that is lower than comparable properties in order to get the best deal.
Keep in mind that the property owner of a short sale property is not in any financial position to pay for repairs or inspections. All short sale properties are purchased on an “as is” basis.
The short sale process does provide advantages for both seller and buyer, but there are many things to consider. Depending on the state of residency, the seller may have to pay for any deficiency from a short sale. The buyer should make sure to obtain all documents and be prepared for a lengthy process. Patience is a requirement.