When shopping for a home, the potential homebuyer will here many terms for home buying including short sale. What is a short sale? What are the potential advantages for the homebuyer? What are the pitfalls of a short sale? This article will give the potential homebuyer an overview of short sales.
What is a short sale?
A short sale is selling the property for less than the owner owes on the property. While this may sound counter intuitive to a homebuyer there are some advantages for the seller. Even though they are not getting the total value of the mortgage, they are selling the house before it’s foreclosed on, usually.
To avoid the stigma on their credit as well as the legal ramifications of a foreclosure, some sellers are willing to take the financial hit of a short sale.
The advantage to the buyer is obvious as they can purchase a home for less than its worth, or at least it’s worth on paper. In this situation, a buyer can purchase a home with built in equity, a valuable commodity in today’s volatile real estate market.
What are the potential advantages for the homebuyer?
The potential advantages for a homebuyer as mentioned above are getting a great deal on a home. Usually the seller has fallen behind on the mortgage payments so the buyer is dealing with a motivated seller.
A seller whose ready to deal and make concessions to get the property sold before the bank or mortage company takes possession of the property and the seller gets nothing except a serious ding on their credit and future problems buying another home.
What are the pitfalls of a short sale?
The name short sale is a little misleading as it leads some homebuyers to the idea that short sales are a quick process. Short sales are a complicated process, as all parties on the selling side of the table have to agree to take less than the mortgage value of the home. This is further complicated if the mortgage is backed up by the government as they must also be consulted.
Short sales are a place where an experienced real estate agent is necessary. Not just experienced but also experienced with short sales. This is a place where a homebuyer needs someone who knows the lay of the land and the path through the short sale process.
This article is not meant to be the ultimate explanation of the short sale but an overview for the potential homebuyer. The real estate agent will be better equipped to help the homebuyer decide if a short sale is for them. If done correctly, a short sale can be a win-win for the buyer and seller.
The seller disposes of a property they can’t longer afford. The buyer gets a property at a better price or more home than their money could usually buy. A short sale can be a good thing for all parties involved.