In the real estate business, there are all sorts of specialized terms that can be confusing to the average layperson. With the condition of the economy like it is, we are seeing many different house sale conditions, including auctions, foreclosures and short sales. These are often the result of people not being able to afford their mortgage payments and being forced to move. Whether you’re in that position and needing to sell, or you’re in the market for purchasing a new home, it’s important to understand all the various terms and options available to you. So let’s go over one of them now. What, exactly, is a short sale?
A short sale, put in the simplest of terms, is when a house is selling for less than the balance owed on the mortgage. A short sale has to be agreed to by the mortgage lender. When a person is unable to make the mortgage payments, the lender agrees to a short sale so they can at least get a portion of their loan back. It is often a way to cut their losses and get something out of it. If they allow the property to go into foreclosure, they will potentially get even less. Some banks can save up to 25 or 30 percent by allowing a short sale rather than going to foreclosure.
Should You Purchase a Short Sale Home?
If you want to buy a new home, a short sale can be an attractive option. With a short sale, you are often able to get a lot more house for your money. The house will be priced well below its value, so it is worth considering, especially for people buying their first home or people who are interested in buying an investment property to rent or flip. You should enlist the help of a realtor who is experienced with short sales. A realtor who is knowledgeable about the process will be a valuable asset to you.
On the downside, most short sale homes are being sold “as is,” meaning the sellers aren’t willing to fix it up for you. Many short sale homes are in less than stellar condition. Some need complete and total rehab, other just a few minor repairs. You should have a building inspector come to the home before you purchase it, and you should get repair estimates from contractors. Consider if you’re really willing to put in the time, effort and money it might take to fix up the home. Short sales also require a lot more paperwork and involve more parties, so they are bound to take longer to complete.
Should You Request a Short Sale for Your Home?
On the other hand, if you’re in financial difficulty and can’t keep up with your mortgage payments, you might want to consider requesting a short sale from your mortgage lender. You will need to begin by writing a letter explaining why you’d like a short sale by detailing your hardships. A short sale is a way to avoid foreclosure, but it will still negatively impact your credit score. Your mortgage lender will need to agree to the short sale, and they will be the one to approve any offers made on the home. If you have any liens against the property, the lien holders will need to agree to the short sale also.
Whether you’re considering purchasing or requesting a short sale, it is always a good idea to consult with an attorney.
Terry Ford has been writing for many years and loves to provide readers with informational material related to trends impacting our economy. Terry uses Grammarly grammar checker to ensure her readers receive the best possible content.