What Is A Short Sale & How Can It Benefit You?

What Is A Short Sale & How Can It Benefit You?

Setting your real estate property up as a short sale could be one of the best decisions ever, especially if you’re underwater on your home and can’t afford to pay your mortgage anymore. But what precisely is a short sale, and how can it benefit you? In this article, you’ll learn what they are and

Setting your real estate property up as a short sale could be one of the best decisions ever, especially if you’re underwater on your home and can’t afford to pay your mortgage anymore. But what precisely is a short sale, and how can it benefit you? In this article, you’ll learn what they are and why they might be the best option available to you right now.

What is a short sale?

Homeowners often sell their homes in a short sale because they cannot afford to make mortgage payments, or they are unable to sell their homes for an amount that will cover the total debt owed on the mortgage loan. A short sale is when a homeowner markets their property for less than the amount owed on the mortgage loan. The lender must approve the deal before it can be finalized.

The process of short sales

Short sales work under three chief processes, including;

(i) Initiating the short sale

The property owner applies for a short sale with their lender, who then approves the deal. The homeowner’s lender will sell their home to a third party at an agreed-upon price. If that third party cannot purchase it at that price, their mortgage company will forgive the homeowner’s mortgage loan

.

(ii) Listing the property 

The home is listed at a price lower than its market value and then offered to prospective buyers. The property owner will try to get as many people as possible interested in purchasing their home. In most cases, they will also make necessary repairs and upgrades to increase their market value.

(iii) Submitting an offer

If a buyer is curious about purchasing your home, they will submit an offer. This may occur either over the counter or through a formal bidding process. If you decide to enter into a short sale and are in default of your mortgage loan, you will be expected to reimburse your lender for any expenses that they incurred as a result of servicing your loan; these expenses include but are not limited to taxes, maintenance costs, insurance premiums and interest on your mortgage loan.

Benefits Of Short Sales

Credit Score Advantages

The home sellers will boost their personal credit scores, and lenders may be more likely to approve future mortgage applications. This is if the borrower has been a good customer in the past and can still afford other payments. This means the lender won’t have to foreclose on the property and take it back.

Saving On Home Sale Fees

If a person chooses to make a short sale, they will not have to pay for any of the regular home selling fees. These usually cost about 3%-6% of the total cost of your home. Simply put, the lender pays the commissions and fees instead of the seller. Furthermore, there is no need to find a buyer as this part of the process is handled by them.

Advantages Of Short Sales To Home Buyers

Reduced price

One great thing about short sales is that the home buyer will acquire the home at a reduced price. Of course, these deals only work out when the lender agrees to this plan. In some cases, lenders require a bigger down payment than usual or an even higher monthly payment amount before they agree to accept less money from the home seller. Discuss all these factors with your lender before signing any agreements!

Less competition

Another great thing about short sales is that home buyer will find themselves in a less competitive bidding environment. Since lenders will not accept other offers from potential buyers, these properties are sold for less money and must be purchased quickly before anyone else can swoop in. This means that you may need to act fast!

Final Word

Short sales are deals that help homeowners get out of underwater homes. The lender gets paid back what they are owed, the seller gets to sell their home for way less than what they owe on it, and the buyer ends up with a house for less than what they would have paid if it were not for the short sale. It is a win-win situation for buyers, sellers, and lenders because everyone walks away happy.

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