Have you heard the term “short sale” in real estate? It’s certainly not something you may be familiar with. It’s worth learning a little about since, depending on the circumstances, it may have benefit for both the buyer and the seller. Let me explain further.
Definition
In a nutshell, a short sale refers to the sale of a property where the net proceeds from the transaction are insufficient to cover the amount owing on the home. In other words, the property owner will not have enough funds in the sale to settle any liens against the house - such as the outstanding amount of the mortgage.
How it works
For a home to be put on the market for sale in this circumstance, all lien holders must agree that they will accept less than the amount owing to them if the sale goes through. Perhaps the homeowner has run into financial difficulties and is behind on their mortgage payments without the prospect of catching up. It could also be that property values have dropped considerably in the community at a time when a planned move out of town for the family cannot be delayed.
The bank that holds the mortgage will need to be convinced that it is in their interest to sign off on a short sale and be comfortable with the amount that they will receive although it’s less than the value of the mortgage. Typically, they will first look at whether foreclosing on the mortgage and repossessing the home is a better option for them.
The bank that holds the mortgage will need to be convinced that it is in their interest to sign off on a short sale and be comfortable with the amount that they will receive although it’s less than the value of the mortgage. Typically, they will first look at whether foreclosing on the mortgage and repossessing the home is a better option for them.
Potential benefits
For the seller, it’s easy to see where a short sale may be of benefit. It allows the current property owner to avoid being evicted and their home being repossessed by the bank. It also won’t impact their credit rating in the way that a foreclosure would, and, in some cases, they may even quality for a mortgage on a new property right away. Taking action to sell a house that you’re unable to afford is sensible.
The buyer of the property can take advantage of purchasing a home below market value. However, if you’re buying a house in a short sale situation, be prepared that there will be a lot of paperwork involved and the whole process may take a while. This is because the bank that holds the mortgage will not approve of the short sale until they’ve had time to thoroughly review a buyer’s offer.
If you’re in the market for a new home, whether you’re interested in a short sale opportunity or not, give me a call. It would be my pleasure to help!
The buyer of the property can take advantage of purchasing a home below market value. However, if you’re buying a house in a short sale situation, be prepared that there will be a lot of paperwork involved and the whole process may take a while. This is because the bank that holds the mortgage will not approve of the short sale until they’ve had time to thoroughly review a buyer’s offer.
If you’re in the market for a new home, whether you’re interested in a short sale opportunity or not, give me a call. It would be my pleasure to help!
