As foreclosure rates come to record levels, more sellers are converting to short sales as a way to keep away from foreclosure. So, how does it work? A short sale home means the seller organizes with their short sale realtor accept a price that's less than the amount that they owe on the property. As part of this agreement, the lender typically agrees to eliminate the rest of the loan. As a result, the seller doesn't have to go through a foreclosure, the buyer picks up a short sale property at a discounted amount, and the lender avoids taking on the stress of unloading the property. Sounds good right? Well, sellers selling short sale housing need to know that a short sale may hurt their credit, though probably not as significantly as a foreclosure. Also, lenders generally will only approve a short sale if the seller is numerous payments behind and has received a default notice. Buyers may get a great short sale property for sale at a discount, but they also will need to go through some extra paperwork as well. Not to mention, they also need to be ready to roll up their sleeves if that new short sale real estate requires fixing up.
Short sale properties for sale at a price lower than the amount owed on the mortgage.
Property owners hope to sell their home as a short sale town home to avoid penalties involved with going into foreclosure. What can make it complicated to buy a short sale is that there are often two mortgages on the home and both the lenders must approve the sale. The possession of the mortgages on a short sale home usually belong to more than one individual, so you'll likely have to persuade multiple banks and lenders to take a loss on their initial loan. This is why it often takes so long to authorize a short sale offer. If the short sale fails and the homeowner can't manage to pay his mortgage, then the bank forecloses on the home.
Short sale condos and properties are still owned by the home-owner, while foreclosures are owned by banks.
If a short sale home for sale cannot be sold in time, the bank starts foreclosure to try to sell the home directly, often in an auction. If the auction fails to turn up a buyer prepared to pay at least what the bank was owed on the home, the home becomes Real Estate Owned (REO), where the owner is the bank. The bank then commonly sells the property through a real estate agent.
If you still plan to make an offer on a short sale, be ready for a long haul. In the meantime, we suggest that you keep touring and considering other properties in case the short sale doesn't go through. Keep in mind that even if your offer is acknowledged, the banks will usually ask you to buy the home as-is and won't cover for any repairs discovered by an inspection.