A real estate short sale is when the homeowners lender allows the home to be sold for less than the total amount owed on the home. There are various reasons that this can happen and could be a good buy for someone who wants to get more for their money in their home. It can be a good investment as long as you understand exactly what a short sale is and all the possible hazards of obtaining a home through a short sale.
Short sales occur when the homeowner can no longer afford the mortgage. Due to the economic downturn, people lost their jobs and some have not been able find work that pays nearly as much as they once earned. That means that they may no longer be in the financial position to pay a steep mortgage payment. Banks have taken this into consideration and in some cases allow the home to be sold for less than what is owed on the mortgage. It saves the homeowner from serious repercussions that come with foreclosure or bankruptcy. Both of these issues affect a person’s ability to ever obtain credit again or having to wait seven years before even thinking about purchasing anything on credit. For the seller (homeowner) this is a great advantage and a fair chance to move forward.
A short sale on a home has negative ramification for the bank that accepts it. The bank is taking an offer for the home for less than they loaned for it to start with. That means that the bank will be losing money through the short sale. In other words, it might take quite a bit of convincing to get a lender to accept a short sale on the property. They may accept it to ensure that they at least get part of their money back rather than losing everything. It can be difficult to sell a home whether it is the homeowner or the lender who foreclosed on them. Lender’s may not want to go to the trouble of foreclosing because it can become very involved. That is another advantage to the homeowner and the potential buyer.
A short sale has obvious advantages for the potential buyer. The buyer puts in a bid for the house that is lower than the asking price. Homes have gone down in value which is why banks have also been known to accept a short sale on certain homes. If the home isn’t as valuable as it was when it was originally sold, the bank will not be able to sell it at a higher price than the bid that is offered. That means the potential buyer gets a home at a much lower price which will eventually rise in value when the economy returns to normal. It’s a great investment.
There are several repercussions to a real estate short sale. There are many facets to it and you have to look at each facet before deciding to ask the bank to allow you to sell the home on a short sale. The buyer also has to be aware of the possible affects a short sale could have on things such as property taxes. The lender will do their homework to make certain that a short sale is the best option for selling the house. Homeowners and potential buyers should do the same.
