Info Tips News – What Does A Short Sale In Real Estate Mean Here Are Things You Need To Know Before Buy One. When you search for a house sale, you often find short-sale offers. What does a short sale in real estate mean? For buyers, a short sale can be more appealing because it often offers more discounts.
On the other hand, it is a safer alternative for both owners and lenders. The benefit for buyers is that they may get a cheaper price than the usual market value.
But, buying some short-sale properties can be tricky. So, this article will give you guidance and knowledge of what you should and shouldn’t do when buying short-sale property.
What Does A Short Sale in Real Estate Mean?
A short sale is a condition when homeowners are in a bad financial situation and sell their homes for a lower price than they owe on the mortgage. The homeowner who chooses the short sale option usually wants to avoid the lender seizing the property upon foreclosure.
By having a short sale option, the lender of the original mortgage gets all the payment of the sale. Another option that comes from this sale is that the lender forgives the difference or applies deficiency judgment. It requires the original borrower to pay what is left.
On the other hand, it seems that this process is less ideal but it turns out that it is a preferable solution to foreclosure. A short sale is a solution for both homeowners and their lenders when they’re facing a financial issue.
They’re indeed taking a loss and giving profit to the buyer from this transaction. But, even though buyers may get cheaper prices than the market, they must be aware that buying a short-sale property is not always a profitable investment.
How Does A House Go Into Short Sale?
A short sale happens when the homeowner can no longer pay the mortgage. If they continue this situation, then the bank will foreclose the house. So, the homeowner may proceed to the short sale option by applying to the lender.
On the other hand, the lender will need to consider whether to approve or disapprove the short sale. The lender may consider if the house is worth less than what the owner owes. Also, the lender will want to review the recent selling price of the house with comparable properties.
The lender will also have to check if the seller can prove their financial difficulties. The seller must prove that they don’t have income money or assets to pay the outstanding.
Is Short Sale Profitable for Buyers?
A short sale was trendy during the financial recession of 2008. During this period, buyers make a profitable trade when they buy a short-sale property and sell it on a declining market.
Today, even though it is not a norm, a short sale is common. RealtyTrack reported that around 5 percent of all single-family homes and condos are short-sale sales.
So, buyers may gain profit from the difference. On the other hand, the seller will only get what they can get. It is because they don’t know if the price will increase in the future.
Short Sale Process for Buyers
There are at least 6 steps for buyers to proceed with a short sale. The process is similar to a traditional deal but a bit complicated.
In a traditional deal, the transaction is only between the seller and buyer. The seller will transfer the money or equity in exchange for the purchase price agreed upon.
On the other hand, the short sale process is when the transaction is from the lender’s side so it becomes more time-consuming. Here are the 6 steps buyer have to face when they buy short-sale property:
1. Get a Financial Approval
Just like in traditional trade, the buyer must present financial approval to secure the ability to purchase the short-sale property.
The lender will ask the buyer to fill out an application and ask for permission to check the buyer’s credit score. They will also check the buyer’s existing income and assets.
After reviewing the buyer’s financial condition, the lender will recommend the mortgage option and inform how much the buyer can borrow.
2. Find A Real Estate Agent and Home
Finding a home that is suitable for you can take a long time. So, focus on foreclosure property on the list. You can also search in the public records from your local country court. After you find the short-sale home, then find an experienced real estate agent to help you.
3. Research your Property
Before placing the offer, you have to gain all information about the property. You have to compare it with other comparable properties in the area. This is when you need help from a real estate agent.
4. Place the Offer
When you place the offer, you better know the value of the local home. You may see the short sale as a way to get a home at a cheaper price but beware that the homeowner may still try to recoup. Should they ask you to pay money under the table, you must say no and report it.
5. Inspect The House
What does a short sale in real estate mean? It means that you buy a house as-is. You cannot ask for a lower price if you find a problem with the house. So, you better get the house inspected before jumping in and buying it.
6. Close the Deal
To close the deal, the seller must provide a hardship letter, proof of income and assets, and a list of liens. Also, you will need to get a comparative market analysis of comparable properties sold on the market for the last 6 months.
Once the approval letter is in order, you can close the deal, take the keys and move into the house.
Conclusion on what does a short sale in real estate mean question is that a short sale is a condition when the homeowner can no longer pay the mortgage and wants to sell the house before the foreclosure. The buyer can benefit from the difference and invest in it.
