What is a Short Sale? A Real Estate Short Sale Guide
A short sale happens when you sell your home or other real estate property and the lender agrees to accept less than what you owe on the mortgage loan in order to avoid foreclosure proceedings.
While this might seem like an attractive option, there are some major risks involved with short sales that you should be aware of before choosing this path. In this guide, we’ll take a look at what short sales are, how they work, and why more homeowners are turning to them these days, despite their inherent risks.
Is it the right choice for you?
Selling a home through a short sale can be a difficult process, but it may be the right choice for you if you’re unable to make your mortgage payments and are facing foreclosure. If you’re considering a short sale, it’s important to understand the process and what’s involved.
You’ll also need to work with a real estate agent who has experience with short sales. The real estate agent will act as an intermediary between you and the lender or bank in order to get approval for a short sale.
The lender or bank will typically offer less than what’s owed on the property as part of the deal; this difference in money needs to be agreed upon by all parties before proceeding with the short sale.
It might take some time before any funds are available because lenders generally hold onto any money that would have gone towards paying off the mortgage until after all of their foreclosure proceedings have been finalized.
The process
A short sale is when a homeowner sells their home for less than the outstanding balance on their mortgage.
This can happen when the value of the home has decreased or if the homeowners are facing financial hardship and can no longer make their mortgage payments.
If you’re considering a short sale, it’s important to consult with a real estate agent to understand the process and what to expect. Here’s a step-by-step guide to help you through the process:
1) Prepare your property for sale –
Make sure all maintenance issues are taken care of and that your property is presentable so potential buyers will be interested in making an offer.
2) Contact your lender –
You’ll need to contact your lender and submit a short sale package including an executed Purchase & Sale Agreement between the seller and buyer, a Letter of Intent from the buyer’s lender promising to buy back the house after closing, an estimated list price for the house that reflects its current market value, and any other supporting documentation required by your lender.
3) Provide disclosures –
The lender may ask you to provide a HUD-1 Settlement Statement form which will allow them to see how much money the lender would lose from a short sale versus foreclosure.
4) Coordinate inspections –
Once you have your signed purchase agreement and executed sales contract, coordinating inspections with your lender may become necessary before they’ll approve your request for a short sale.
5) Meet with bankruptcy attorney –
The bank may require that you meet with an attorney specializing in bankruptcy law before they agree to proceed with the transaction.
6) Get approval –
In some cases, lenders might require additional approvals (such as creditor permission). Finally, once all conditions have been met, they should close the deal.
Things to consider when looking at a short sale property
1. The first thing to consider is whether or not the property is really a good deal. Just because it’s a short sale doesn’t mean it’s automatically a great deal. Do your research and make sure you’re getting a fair price.
2. Another thing to keep in mind is that short sales can take a long time to go through. If you’re not patient, this may not be the right type of property for you.
3. You also need to be aware that the bank may not accept your offer, even if it’s lower than the asking price. They may counteroffer or they may just refuse outright. Be prepared for this possibility.
4. One more thing to think about is that you’ll likely be dealing with an uncooperative seller. You won’t have much say in how things are done when buying a short sale home, so don’t count on being able to pick out paint colors or flooring. It will likely be up to the current owner what goes into the house and what stays out.
5. Finally, there are often liens against these properties that you’ll have to deal with after closing on the purchase. Make sure you know what those liens are before signing anything!
6. So remember, when considering a short sale home: know exactly what kind of deal you’re getting before taking any steps towards purchasing one!
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