The Benefits of a Short Sale: For Buyers & Sellers
Maybe you’ve heard the term “short sale” but aren’t exactly sure what it is. Maybe you’re considering selling your home as a short sale, or perhaps buying a home listed as a short sale. Whatever your situation, it’s important to understand all your options when it comes to buying or selling a home. So take some time to learn more about short sales—what they are, and how they can benefit both buyers and sellers.
What is a Short Sale?
Long story short, a short sale occurs when a seller sells a home for less than they owe to their lender. This can occur either because the seller has defaulted on their mortgage payments and is in danger of foreclosure or because their home has significantly decreased in value. In order for a short sale to be accomplished, the lender must agree to accept less than the amount owed as fulfillment of the mortgage.
Why Choose a Short Sale: Sellers
The reason for choosing a short sale is simply to avoid foreclosure. Failure to make payments on your home has a serious negative impact on your credit and can ultimately result in the bank repossessing ownership of your home in a foreclosure. Foreclosures drop credit scores over 100 points, affect your credit report for seven years, and prevent you from buying a new home for the next five years. Understandably, this is a course of action you’ll want to avoid at all costs.
One of the ways around a foreclosure is the short sale—selling your home for less than you owe.
Why Choose a Short Sale: Buyers
The main reason buyers choose short sales is for their price tags. Often, short sales are priced below market value, enabling buyers to find good homes at lower prices—the “discount shopping” of home buying. However, since the short sale process tends to be more complex than a standard home sale, it’s important to ensure that you’re choosing to work with a Realtor experience in short sale real estate.
How to Buy or Sell a Short Sale Home
The main difference between a short sale transaction and a standard transaction is that the sale must be approved by the bank (i.e., the lender must be willing to accept a payment lower than the total amount due). First, the seller must submit a Short Sale Package explaining their financial hardship, providing financial documents, and requesting the short sale.
Next, the buyer will negotiate with the seller to determine the final offer price. Then, they submit a Short Sale Offer with their pre-approval and their earnest money check. The bank will then either approve the transaction, deny it, or attempt to negotiate for a higher price.
What is a Foreclosure or Real Estate Owned (REO) Sale?
Simply put, a foreclosure occurs when a seller can no longer make mortgage payments and the bank has seized control of the home or the owner has vacated. The bank then places the home on the market or auctions it off in a public process.
Why Buy a Foreclosure?
Banks don’t want to own homes; they want to liquidate the assets as quickly as possible. And that means they want to sell the home fast. Buyers searching foreclosed homes will often find great prices well below market value. But do use caution: Foreclosured homes are usually sold “as-is” and are often not in the greatest condition if they have been abandoned or neglected by the seller.
Thinking of Buying or Selling a Short Sale Home?
If you’re thinking of selling your home in a short sale or buying a short sale or REO home, then it’s time to contact Glazers Realty. We want to ensure you have all the information you need to make the best decision for your real estate goals, and to ensure your transaction goes off without a hitch!