Aug 2, 2018 | Mortgage
On the surface, a short sale seems like the perfect deal. However, before you take the plunge, you need to understand how this type of home purchase works.
What Is a Short Sale?
A short sale is a home sale in which the homeowner is selling the home for less than he or she currently owes on the mortgage. In most cases, this means that the buyer is paying less for the home than it’s worth, which leads to instant equity.
Short sales allow homeowners to get out from under mortgages without damaging their credit as much as a foreclosure. Lenders often agree to short sales because the foreclosure process is lengthy and expensive, so short sales can be more beneficial for both parties in the long run.
Advantages
When you buy a short sale, you can often get a nicer home for a lower price. In most cases, you will still be able to use financing to purchase a short sale.
A homeowner attempting a short sale also tends to be highly motivated, which means they will be willing to negotiate on almost any aspect of the sale.
Disadvantages
Although purchasing a short sale can be lucrative, the process isn’t easy. Short sales can take as long as nine months to complete, which is much longer than the time required for the typical home purchase.
Because the homeowner owes more on the mortgage than you will be paying, the bank must agree to the price. This means that even if the homeowner is willing to accept your offer, the bank can still reject it.
If the home secures more than one mortgage, all of the lenders must agree to the sale before it can close. This can lengthen the process even more.
Even though the bank will hold up the process, they will want you to be flexible. Banks are less likely to approve offers from buyers with multiple contingencies, such as a house that needs to sell before closing.
Should You Purchase a Short Sale?
The decision to make an offer on a short sale home is personal. Although there are many obstacles and potential disadvantages, you may be able to save money and build equity quickly if you are able to complete a short sale successfully.
Keep in mind that most banks considering a short sale will want to see a well-qualified borrower who offers flexible closing terms, so it’s best to contact your mortgage professional for a pre-approval before you make an offer on the home.
Your trusted real estate professional is a qualified partner to help you with a short sale home purchase.
Jun 12, 2018 | Real Estate
If you have been looking for a new home, and you find one offered under a short sale, this may be to your advantage. While some buyers are wary about buying a home that needs to be sold with the approval of the lender, it’s a great way to get a bargain on a home that you love.
A short sale may be a perfect way to buy a home, as long as you are able to wait until the offer is approved.
The Basics Of A Short Sale
A short sale occurs when the homeowner is facing a foreclosure and trying to avoid it. The true owner of the property, is the lender who provided the money to purchase the home. The borrower owes more on the home than it is worth, and many stop making mortgage payments. Instead of allowing the home to sit there and go to a foreclosure, the lender tries to cut their losses through the process of a short sale.
Additionally, there may be other liens on the home that have to be satisfied by the sale of the property. Anyone that holds a lien on the property has to negotiate the money they are willing to accept for the deal to be finalized.
Why A Short Sale Benefits The Buyer
When you make an offer on a home that is selling under a short sale, you can usually offer less than what the home is worth. The homeowner is eager to sell the home. The homeowner will want to accept an offer fast to get the process started and avoid a foreclosure.
While you may have to wait longer for a short sale to go through than a traditional sale, the savings on the price of the home are usually worth it. Lien holders understand that a short sale is usually the best option to get most of their money, so they are anxious to settle the deal fast.
A short sale is right for you if you aren’t trying to buy a home fast. When you are a savvy buyer, you can make an offer less than the asking price, but you’ll have to wait for all lien holders to accept it. If your current living situation provides you with the opportunity to wait, a short sale will give you more house for your money.
Talk with a real estate agent to learn more about a property if you find one you love that is under a short sale.
Apr 26, 2018 | Real Estate
As a potential home buyer, you are probably familiar with what a typical sale looks like. You probably also have a basic understanding of what a foreclosure is and how it works. Another type of sale that may be less understood is called a short sale.
These sales are not as popular in the market, but you may come across a few. You may even fall in love with a home that is listed as a short sale. What does this mean for you as the buyer? These are the basic facts that you need to know about these homes and the process for purchase.
What Is A Short Sale?
A short sale is negotiated when the lender for the current homeowner’s mortgage agrees to list the house for a smaller mortgage payoff amount. This means that they will be taking in less money than what is owed on the property in order for it to sell quickly on the market.
This usually happens when the current owner of the property, the seller, is in a distressed financial state. There are many reasons why a seller may have lost the ability to pay their mortgage, such as losing income or unexpected expenses. Maybe the owners are going through a complicated divorce and need to unload the property. Regardless of the reason, the lender has an incentive to remedy this situation.
How Does It Work For The Buyer?
When it comes to purchasing a short sale property, the process is not much different than purchasing any other home on the market. The lender will want to make sure that you will be able to complete the purchase, especially under these circumstances, so you will likely need to be preapproved or prequalified before your offer can be accepted.
One major difference is that the process is typically more drawn out than if you were making a traditional home purchase. Even though it is called a short sale, it is not something that happens very quickly. In fact, it can take an average of 2 to 4 months for a short sale to be approved and for the actual closing to take place.
Now that you understand the basics of a short sale and how it works, you can decide if it is something that may fit into your criteria and timeline. If so, and you do find a home you love, you should not let something like a short sale stop you from getting it. Your real estate agent can help navigate you through the process to make it as simple as possible.
Dec 20, 2012 | Personal Finance
The process of buying a foreclosed home is slightly different from the process of buying a non-foreclosure home. If you want to invest in Worcester County area foreclosures, therefore, it is important to understand the different ways by which to purchase a foreclosed home.
There are three main ways to buy a foreclosed home.
Buying before the auction
Some delinquent homeowners may want to sell their homes before facing an actual foreclosure.In this instance, the homeowner, in agreement with the lender, agrees to sell the home for less than the amount owed on the mortgage.This is called a short sale. Short sales are “pre-foreclosures”, of sorts. By broadening your home search to include short sales, you can identify homes that may be sold at a discount.
Buying at the auction
Another way by which you can invest in foreclosure homes is by buying the home at auction. From area to area, the legal requirements for the sale of a foreclosed home at auction may differ. If you plan to buy at auction, you’ll want to be familiar with your area’s customary judicial proceedings.
Buying after the auction
Buying after the auction means buying bank-owned properties. This can be the most lucrative and safest means of investing foreclosure properties. This is because lenders often reduce the sales prices of their home inventory in order to “sell it quickly”. It can be expensive for banks to own foreclosed homes, and few banks are equipped for managing owned homes. Check with your local real estate agent to see what, if any, bank-owned homes are available for sale in your area.
The process of buying a distressed home is different from the process of buying a “traditional” one. Therefore, regardless of which path you follow to buy a foreclosed property, have an experienced real estate professional on your team.
Dec 18, 2012 | Housing Analysis
Foreclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.
In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales — also known as “short sales” — climbed 22% on a year-over-year basis.
For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.
The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender’s losses, and foreclosed properties be expensive to manage.
Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :
- Average sale price of a residential property in short sale : $191,025
- Average sale price of a residential property in foreclosure : $161,954
It’s not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks.
For homebuyers in Worcester County area , the banking industry’s shift toward short sales is welcome news.
Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they’re getting faster and more efficient. This makes it “easier” for a buyer to buy a home in short sale.
However, don’t buy a short sale without the help of an experienced, licensed real estate professional.
The negotiation process is different for a short sale than with a “traditional” home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.
