A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan and is a strategy rapidly gaining popularity in the real estate market. It is a real estate transaction in which the seller’s lender agrees a payoff that is less than the balance due on the loan and in which the borrower does not have to pay the difference. This agreement takes place between the seller and their lender, prior to the onset of foreclosure, allowing the home to be sold for less than the current outstanding loan balance. When a homeowner owes more on their home than it is worth, this type of sale may be an option. The goal of a short sale is to help the homeowner avoid foreclosure and when both the borrower and the lender agree to the process, it generally enables the avoidance of foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. Keep in mind that, unlike bankruptcy line items, short sales do show on a credit report and can remain on your credit report for 7-10 years.
A real estate investor engaging for the first time in foreclosures and short sales will need to know exactly what such a transaction is and clearly understand the process involved. A key component for a buyer to be successful when purchasing a short sale is to make sure that they do research on the market conditions and area of the home. Although acquisition through this type of deal structure can be a successful strategy in purchasing distressed real estate, due to the real estate market’s foreseeable inconsistencies a buyer can purchase a home and still experience additional reduction in value. Keep in mind that while Lenders want to get rid of distressed properties as soon as possible, they typically aren’t going to sell them for ridiculously low prices. It is also important to remember that it is very possible that a transaction can and will fall through if the Broker Price Opinions come in much higher than the agreed upon price.
A real estate short sale is a strategy that can help homeowners who owe more for their house than the houses are worth, and is another option of relief for troubled homeowners. Before proceeding with any real estate deal it is imperative to evaluate your personal situation and determine if the proposed contract and property is right for you. A short sale is typically faster and less expensive than a foreclosure, but there are downsides that merit consideration as well. Sellers should be careful to consult with their lenders and tax advisers as to the impact of any financial event of this magnitude and clearly understand the impact of the potential outcomes. If all other options have been exhausted and a short sale is the best choice, it is highly recommended that the seller work with a licensed real estate agent who can assist in listing the home for sale. Sellers should also keep in mind that Buyers can get tired of waiting for the sale approval and cancel because banks can’t currently process these types of deals fast enough. Buyers need to understand the current market conditions and values and work with a Realtor they trust. However, when utilized in the appropriate situations a short sale can be beneficial to all parties involved.
Added: by Utopia Realty