Quicken Loans - The Easiest Way To Get A Home Loan

facebook Twitter RSS

Home > Real Estate Investment > What is a Short Sale in Real Estate

What is a Short Sale in Real Estate?

What is a short sale? A short sale is actually a pre-foreclosure sale. This means that the home seller is willing to accept an amount that is discounted in order to payoff their existing mortgage and avoid pending foreclosure. A seller may be willing to do this in order to salvage their credit and as much as possible from the sale of the home before it actually goes into foreclosure.

Short sale deals are often attractive to many home buyers and real estate investors. A short sale real estate may frequently show up when you see a home that is advertised with a price that appears to be lower than the average prices in the neighborhood. Before you act on such a short sale property it is imperative that you take the time to find out whether the property is a short sale.

While there are certainly some advantages associated with buying a property in a short sale, including obvious savings advantages, there are also some disadvantages as well.

For example, you should understand that while the short sale homes may be listed with a lower price this does not mean the lender itself will be willing to accept your offer. In some cases, the seller may be willing to accept the offer but the lender will not.

Also, you should know that the seller must be in default and must have stopped making mortgage payments before the lender will typically be willing to accept a short sale. In addition, there are cases in which the seller owes more than the home is actually worth. In this situation the discounted price might bring the price of the home in line with its market value but will not bring the price of the home below market value. If you're looking for a good deal, especially if you intend to resell the property for profit purposes, you may find yourself out of luck.

To avoid such problems it is essential that you take the time to do your own research before making an offer on a short sale deal. Take the time to find out who is actually in the title and whether a foreclosure notice has even been filed. You should also find out how much money is owed to the lender because this can play a role in how much you should offer for the property.

It is also important to take the time to find out how many loans are on the property. In some cases there may be two loans and this can complicate matters to some degree. The first mortgage loan is generally protected by the second lender unless the second lender does not wish to foreclose.

If you do plan to make an offer on a short sale home, make sure you are working with an agent that has experience in handling short sales. An experienced short sale agent will be able to help you quickly close the transaction while also protecting your interests at the same time.

Keep in mind that most lenders will not agree to a short sale unless the seller really has no equity in the property and is unable to repay the difference between the existing loan or loans and your purchase price.

You should also be aware of unscrupulous sellers who will try to finagle money out of the transaction under the table. This is complete fraud. In a short sale, the seller receives no money out of the transaction because the lender is actually losing money.

If the seller does accept your offer, you will need to send it to the lender for their approval. At this time you will also need to make sure the lender receives a copy of your earnest money deposit. The lender may even ask you to increase your earnest money deposit. You should also be prepared for the fact that the lender may wish for you to have your loan available and be pre-approved for the loan. You can help to expedite matters by sending a pre-approval letter to the lender in advance.

It can also be helpful to make your offer contingent upon the acceptance of the lender. You should provide a timeframe in which the lender must respond. After that time frame passes, you will be free to cancel your offer if the lender does not respond. A good time frame is anywhere between two and three weeks, providing you have submitted all relevant information the lender will need in order to make a decision.



Buy House and Sell House Fast Back to Buy House and Sell House Fast

Home  ::  Home Buying  ::  Home Selling  ::  Home Mortgage  ::  Real Estate Investor  ::  Foreclosure  ::  Real Estate Service 

Bookmark Us  ::  Submit URL  ::  Resources  ::  Terms of Use  ::  Privacy Policy  ::  Site Map  ::  Contact Us 

Copyright © 2005 - 2018 All Rights Reserved.